US Treasuries Worst Bond Performers Due to Fed Expectation

Treasuries are the world’s worst-performing bonds this quarter amid concern investors are underestimating risk the Federal Reserve will raise borrowing costs next year.

U.S. 10-year yields rose alongside those of European bonds, reaching the highest in a month, before the Treasury auctions $21 billion of the benchmark securities. U.S. government debt fell for a fifth day, the longest skid in three months, before data this week analysts forecast will show jobless claims fell and retail sales gained. The Fed is paring bond buying even as the European Central Bank has introduced new stimulus, helping euro securities outperform Treasuries.

“There’s some nervousness over Fed policy,” said Thomas di Galoma, head of fixed-income rates at ED&F Man Capital Markets in New York. “As we get closer to ending quantitative easing, there’s always a risk the Fed comes out and says something a little bit more hawkish. We’re starting to see a bottom in global rates in general.”

The U.S. 10-year yield rose three basis points, or 0.03 percentage point, to 2.53 percent at 9:09 a.m. New York time, the highest since Aug. 1, according to Bloomberg Bond Trader data. The price of the 2.375 percent note due in August 2024 fell 9/32, or $2.81 per $1,000 face amount, to 98 19/32.

via Bloomberg

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