BLBG:Treasuries Inflation Gauge Falls to One-Month Low
Treasuries fell, with 10-year yields rising from the lowest level in two months, before a government report that economists said will show factory orders rebounded in February.
Benchmark yields climbed after slipping below their 100-day moving average. The Federal Reserve’s gauge of inflation expectations dropped to the lowest level in a month before a government report this week that economists said will show the U.S. is adding jobs without driving wages higher. Ten-year yields will climb to 2.31 percent by year-end, according to a Bloomberg survey of economists.
“The question is whether the data is starting to turn,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “This is a crucial area at about the 100-day moving average on 10-year yields. That’s what so far has stopped the rally.”
The 10-year yield rose two basis points, or 0.02 percentage point, to 1.85 percent at 8:01 a.m. New York time, according to Bloomberg Bond Trader prices. The 2 percent note due in February 2023 fell 5/32, or $1.56 per $1,000 face amount, to 101 11/32. The yield dropped to 1.82 percent, the lowest since Jan. 24, below the 100-day moving average at 1.83 percent.
Factory orders rose 2.9 percent in February, after dropping 2 percent the previous month, according to a Bloomberg survey of economists before the Commerce Department data. A separate report today is forecast to show vehicles sales were little changed in March.
U.S. employers hired 200,000 workers in March, after adding 236,000 in February, according to another Bloomberg survey before the Labor Department report on April 5.
Weaker Manufacturing
Treasuries rose yesterday after a measure of manufacturing was weaker than economists predicted. The Institute for Supply Management’s factory index fell to 51.3 in March from 54.2 the month before, boosting demand for the safest assets.
“We’re not eager to downplay the bond bullish data aspects as the second quarter gets underway, but in being intellectually honest we’ll concede ISM is still over 50 and consistent with an expansion,” Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut, wrote in a note to clients. Payrolls and unemployment data “will be the first- order tradable events,” he wrote.
The central bank’s measure of traders’ outlook for inflation from 2018 to 2023, known as the five-year forward break-even rate, dropped to 2.71 percent as of the most recent figures on March 28, the lowest since Feb. 25.
“Inflation is stable,” said Kei Katayama, who buys non- yen debt in Tokyo for Daiwa SB Investments Ltd., which manages the equivalent of $53.4 billion. “People feel safe in Treasuries because of the huge support from the Fed.”
Yields may rise as the economy expands, he said.
U.S. government securities were little changed this year as of yesterday, according to Bank of America Merrill Lynch indexes. The MSCI All-Country World Index (MXWD) of stocks gained 6.2 percent including reinvested dividends.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net NI USB NI BON NI GBN NI NOB NI US
