By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices fell on Friday, adding to a weekly rise in yields that’s the biggest since July,
Bonds pared losses after a trio of “bond-friendly” economic reports, said Gary Pollack, head of fixed-income trading at Deutsche Bank’s private-wealth-management unit.
The data will likely allow the Federal Reserve to maintain easy monetary-policy measures but at the same time further reduce the argument for expanding the central bank’s bond-purchase program.
Yields on 10-year notes 10_YEAR +2.37% , which move inversely to prices, rose 4 basis points to 2.33%. A basis point is one-hundredth of a percentage point.
Yields on 30-year bonds 30_YEAR +0.88% added 2 basis points to 3.43%, off a high of 3.48%.
Yields on 5-year notes 5_YEAR +4.48% jumped 4 basis points to 1.14%.
Yields on all three securities are still at their highest level in more than four months.
Two-year note yields 2_YEAR -2.88% turned down 1 basis point to 0.37%, not far off their highest level since July.
For the week, yields on 10-year, 2-year and 5-year notes have jumped by the most since July.
Yields on 30-year bonds jumped the most since October 2010.
Yields lurched higher earlier this week after the Federal Reserve’s policy statement was taken as showing officials were slightly more comfortable with the economic outlook and most U.S. banks passed their stress tests.
They moved back up to levels not seen since last October, when the Fed began a program known as Operation Twist, under which it’s still buying long-term debt and selling shorter-dated holdings to hold down interest rates without the central bank further expanding its balance sheet.
“The rise in rates is healthy because it shows we’re slowly getting back to more market-determined rates that Fed-determined rates” due to its bond-buying operations, Pollack said. “I wouldn’t be surprised to see rates go a little higher, maybe 2.40% or 2.50% on 10-year yields, but that’s when they become somewhat interesting from a short-term trading point of view,’ Pollack said.
Those levels could bring traders back in, keeping the range between there and about 2% at the low end, he said.
Bonds initially pared losses after a Labor Department report showed the consumer price index rose 0.4% in February, driven by rising gas costs. Core prices, excluding food and energy, rose a less-than-expected 0.1%, however. Read more on retail-level inflation.
“Despite the spike in energy prices, which should have only temporary effects on CPI inflation, the downward trajectory for consumer price inflation remains largely intact,” said Millan Mulraine, senior macro strategist at TD Securities. “We expect the benign inflationary backdrop and weak pace of slack absorption in the economy to provide a supportive environment for monetary policy.”
Separate reports showed consumer sentiment unexpectedly fell this month, for the first time since August, and industrial production was flat last month. Read about consumer sentiment. See story on industrial production.
