Treasury 10-year note yields fell to within a quarter-percentage point of the record low reached two weeks ago as investors sought safety amid Europe’s debt crisis and signs U.S. economic growth is slowing.
U.S. government securities rallied as drops in industrial production and consumer prices boosted bets the Federal Reserve will add more stimulus to sustain economic growth. Volatility climbed to the highest since December as investors await the Greek election tomorrow amid speculation central banks will take steps to provide liquidity to financial markets.
“Europe is still a mess, there has been relatively disappointing U.S. data and there is increasing chatter about the possibility of the Fed doing some sort of further easing,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo & Co. in Milwaukee. “There are a lot of wild cards and a lot of uncertainty domestically and abroad, and until something changes, Treasuries can stay near these levels.”
The benchmark 10-year note yield decreased six basis points, or 0.06 percentage point, to 1.58 percent on Friday in New York, from 1.64 percent a week earlier, according to Bloomberg Bond Trader data. It fell to a record 1.44 percent on June 1. The 1.75 percent security due in May 2022 rose 17/32, or $5.31 per $1,000 face amount, to 101 18/32. Bloomberg
Treasuries fell last week, pushing 10-year yields up the most in almost three months, as speculation European leaders would make progress stemming their debt crisis damped haven demand. Bonds dropped on June 14 as traders speculated whether global central banks would coordinate assistance if the Greek election increases financial-market turmoil.
The Fed opens a two-day policy meeting on June 19. The central bank purchased $2.3 trillion of bonds from December 2008 to June 2011 in two rounds of a tactic called quantitative easing to stimulate the economy. It has kept its benchmark interest rate at zero to 0.25 percent since December 2008.
The Treasury sold $66 billion of notes and bonds this week, drawing record low yields at auctions of 10- and 30-year debt. A $21 billion sale of 10-year notes on June 13 yielded 1.622 percent, and a $13 billion offering of long bonds the next day yielded 2.720 percent.
Central banks intensified warnings that Europe’s failure to tame its sovereign-debt crisis threatens to roil the world’s financial markets. Monetary policy makers from the U.K. to Japan and Canada sounded the alert about potential fallout. They spoke as Group of 20 leaders prepare for a summit in Mexico next week amid the weakest international economy since the 2009 recession. Bloomberg