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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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza