Comments by St. Louis Fed’s Bullard, other speakers also in focus
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices extended a decline on Monday, pushing benchmark 10-year yields up for an eighth session, after a report showed U.S. personal spending rose at a faster pace than some economists expected.
Traders are also preparing for the first of three major government-debt auctions this week.
Yields on 10-year notes (UST10Y 3.47, +0.03, +0.99%) which move inversely to prices, rose 4 basis points to 3.48%, after trading at 3.46% before the data. A basis point is 1/100th of a percent.
It’s the longest string of days with 10-year yields rising in at least three years.
Yields on 2-year notes (UST2YR 0.78, +0.04, +5.57%) increased 3 basis points to 0.78%, under pressure ahead of a sale of new securities later in the session.
U.S. consumer spending rose 0.7% on a nominal basis in February, the Commerce Department said. Personal incomes rose, but at a slower rate than some analysts expected. See story on spending, income.
“This was a fairly strong report, suggesting that U.S. households are continuing to do their part for the economic recovery despite the stiff headwinds that they continue to face,” said analysts at TD Securities.
Still to come are data on pending home sales, a Federal Reserve buyback, two Fed officials sceduled to make public remarks, and the Treasury’s sale of 2-year notes.
Analysts noted comments over the weekend from James Bullard, president of the Federal Reserve Bank of St. Louis.
He said the economy has strengthened, inflation is a concern, and it may be a good idea for the U.S. central bank to reduce its quantitative-easing program earlier than planned.
It’s still reasonable to review the Fed’s multibillion-dollar program of bond purchases “in the coming meeting, especially this April meeting, and to see if we want to decide to finish the program or to stop a little bit short,” Bullard said, according to Dow Jones Newswires.
Bullard isn’t a voting member of the policy-setting Federal Open Market Committee.
“Treasurys are weaker this morning as the markets digest recent Fed statements that suggest that a growing number of FOMC members believe that U.S. growth is now on a sustainable path,” said strategists at RBS Securities.
In November, the Fed began a program of expanding its purchases of U.S. bonds in a program that’s become known as its second round of quantitative easing, nicknamed QE2. The program is expected to end in June.
As part of the program, the Fed will buy up to $7.5 billion in 2015 to 2016 during the session.
After 1 p.m. Eastern time, the Treasury Department will announce results of its auction of $35 billion in 2-year notes.
On Friday, bond yields rose, adding to weekly losses, after another Fed official — the Philadelphia Fed’s Charles Plosser — said he favors hiking interest rates and quickly selling off assets. See more about Treasury yields, Plosser.
