Will funding record deficits and increasing rates cause falling bond investments?
“Treasuries Fall as U.S. Prepares Record $123 Billion Note Sales
Treasuries fell, with 10-year note yields touching their highest level in two months, as the U.S. prepared to sell a record $123 billion of notes to fund its stimulus program and record deficits.
Government securities declined for a fourth day before today's offering of $7 billion in five-year Treasury Inflation Protected Securities, the first of four note auctions this week. The Federal Reserve is likely to end its $300 billion debt buybacks on Oct. 29.
‘The story for this week is the four auctions and that could be a bit problematic,’ said David Ader, head of U.S. government bond strategy in Stamford, Connecticut, at CRT Capital Group LLC.
The yield on the 10-year note increased eight basis points, or 0.08 percentage point, to 3.56 percent at 10:34 a.m. in New York, according to BGCantor Market Data, the highest level since Aug. 24. The 3.625 percent security maturing in August 2019 fell 20/32, or $6.25 per $1,000 face amount, to 100 18/32.
‘The momentum suggests we could move higher in yields,’ CRT's Ader said. ‘If we break 3.52 percent, then the next projection is 3.76 percent. Resistance is at 3.28 percent.’
The 10-year yield will increase to 3.56 percent by year- end, according to the average forecast of analysts in a Bloomberg survey, with the most recent estimates given the heaviest weightings.”