Treasuries advanced, pushing 30-year bond yields to a 15-month low, as the collapse of yields in Europe prompted investors to reach for higher-yielding U.S. government bonds.
An auction of $35 billion in five-year notes drew the highest demand in 13 months from an investor class including foreign central banks as the debt yielded almost the most over its German equivalent in nine years. Federal Reserve Chair Janet Yellen said last week interest rates may rise from zero sooner than policy makers estimate on labor markets gains, while weaker data in Europe is spurring speculation the European Central Bank will consider quantitative easing.
“The rally is being led by what’s going on in Europe and the bond markets there,” said Charles Comiskey, New York-based head of Treasury trading at Bank of Nova Scotia in New York, one of 22 primary dealers that are obligated to bid in U.S. debt auctions. “The Fed is in play, so you’d best be out the curve a bit in the seven- to 10-year sector, as long as there are no hiccups with inflation.”