Treasury 10-year yields fell to a record low for a second day on concern the European debt crisis is widening before U.S. government reports on economic output and jobless claims.
U.S. government securities pared a second monthly advance earlier as a technical indicator signaled their recent decline was poised to end. U.S. debt has returned 1.6 percent this month, according to indexes compiled by Bank of America Merrill Lynch. The MSCI All-Country World Index of shares slid 8.7 percent in the same period.
“It really continues to be the ongoing European saga and the competing headlines, which have driven the market to these record-low yield levels,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The fact that we saw a modest backup overnight is not a surprise, considering how low 10-year yields are.”
The benchmark 10-year yield fell one basis point, or 0.01 percentage point, to 1.62 percent at 8:02 a.m. New York time. The 1.75 percent security maturing in May 2022 gained 1/32, or 31 cents per $1,000 face amount, to 101 7/32. The yield earlier declined to a record 1.5933 percent.
The 14-day relative-strength index for 10-year Treasury yields fell to 28.5 yesterday. A reading less than 30 suggests to some traders that rates have declined too quickly and are set to change direction.
The U.S. economy grew at a 1.9 percent annual rate in the first quarter, compared with the previous estimate of a 2.2 percent pace, according to a Bloomberg News survey of economists. Initial jobless claims were unchanged last week, according to a separate survey.
Economists estimate a Labor Department report tomorrow will show the U.S. added 150,000 jobs in May, up from 115,000 the previous month. The jobless rate held at 8.1 percent, a separate survey showed.
The central bank plans to buy as much as $2 billion of Treasuries due from February 2036 to May 2042 today as part of the plan to replace $400 billion of shorter-term debt in its holdings with longer maturities, according to the Fed Bank of New York’s website. The Fed previously expanded its balance sheet by $2.3 trillion in two rounds of bond purchases.
Fed policy makers are scheduled to meet in Washington on June 19-20 to consider what to do when the $400 billion maturity-extension program expires in June.
Treasuries underperformed German bonds and U.K. gilts this month, according to the Bank of America Merrill Lynch indexes. German debt made a 2.8 percent profit and gilts returned 3.7 percent, the indexes show.
Irish citizens vote today on the European Union’s latest treaty with polls indicating they will endorse measures designed to ease the region’s debt crisis. The surveys show supporters of the Fiscal Stability Treaty lead by about 18 percentage points even as doubts grow about the viability of the euro region.
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