‘Important technical’ dynamics seen at work in bond market
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose on Friday, pushing long-term yields down for a fourth day and back to levels not seen since just after the Federal Reserve’s March 13 meeting.
Treasury prices added to gains after a report showed U.S. sales of new homes unexpectedly slowed in February.
Yields on 10-year notes 10_YEAR -2.89% fell 6 basis points to 2.22%. A basis point is one one-hundredth of a percentage point.
The benchmark securities recently touched their highest yield level since late October, running up from 2% two weeks ago. Bond prices move inversely to their yields.
Yields on 5-year notes 5_YEAR -4.53% fell 6 basis points to 1.07%, after reaching their highest level since early August earlier this week.
Thirty-year bond yields 30_YEAR -1.69% slipped 5 basis points to 3.31%. Yields had touched their highest level since September earlier this week.
Starting after the Fed’s policy meeting late on March 13, bond yields spiked higher as investors interpreted the central bank’s statement as more optimistic and less inclined to any form of more bond buying.
Yields spiked last week by the most since July, then reversed some of the move in the current week.
“For a while, we’ve seen a decline in expectations for more Fed purchases,” said John Canavan, a bond market analyst at Stone & McCarthy Research Associates. “At the same time, the economy has surely but steadily improving.”
However, on the technical side, long-term yields had failed to break above key resistance levels, and many traders were short -- positioned for a move higher in yields.
“We had a really coiled market ready to spring, so when those levels finally fell in the aftermath of the Fed Open Market Committee meeting, we saw a cascading wave of technical selling,” Canavan said.
“There were good fundamental reasons for the selloff, but the extent of the selloff was more technical.”
Ten-year yields have declined from 2.29% a week ago, after jumping 26 basis points.
Thirty-year yields are down from 3.41% last Friday, giving back some of the 23-basis-point rise.
