Bloomberg News

Treasury 10-Year Note Yields Rise Most Over Four Days Since 2009

September 28, 2011

Sept. 28 (Bloomberg) -- Treasuries fell and 10-year note yields increased the most over four days in almost three years after orders for durable goods fell less than forecast and European leaders sought to contain the region’s debt crisis.

Yields touched a one-week high as European Commission President Jose Barroso said the region’s permanent bailout fund should start sooner. Five-year note yields rose before the U.S. government’s $35 billion auction of the securities.

“Durable goods, although it didn’t really impress too much on the headline, showed some pretty good strength,” said Thomas Simons, a government debt economist in New York at Jefferies Group Inc., one of 20 primary dealers obliged to participate in U.S. government auctions. “There’s additional selling pressure because of the auctions this week.”

Yields on 10-year notes increased seven basis points, or 0.07 percentage point, to 2.04 percent at 11:44 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent securities maturing in August 2021 slid 5/8, or $6.25 per $1,000 face amount, to 100 23/32.

The 10-year note yields touched 2.05 percent, the highest level since Sept. 16. They have increased 33 basis points over four days, the most since January 2009. The yields are still poised for their third consecutive monthly drop after touching a record low 1.6714 percent on Sept. 23.

A one-point drop in 30-year bonds pushed yields up five basis points to 3.12 percent. Yields on five-year notes advanced five basis points to 0.98 percent before the U.S. offering.

Auction Outlook

“The auction will go well,” said Jason Rogan, director of U.S. government trading in New York at Guggenheim Partners LLC, brokerage for institutional investors. “You’ve had a decent enough concession where buyers will come in.”

The five-year notes due for sale yielded 1.020 percent in pre-auction trading, versus 1.029 percent at the prior offering on Aug. 24, which was a record low. Investors bid for 2.71 times the amount offered last month, compared with the average of 2.76 for the past 10 auctions.

Yesterday’s $35 billion auction of two-year notes produced the highest demand since September 2010 as some investors sought refuge from European and U.S. turmoil. The government will sell $29 billion of seven-year notes tomorrow.

Treasuries have rallied this quarter on demand for a refuge from Europe’s debt crisis and a stalled American economy. U.S. debt securities have returned 5.8 percent in the third quarter, the most since the depths of the financial crisis in the fourth quarter of 2008, according to Bank of America Merrill Lynch indexes. They have gained 1.1 percent in September.

Fed Debt Buying

Yields on 30-year bonds fell last week the most in almost three years and two-year note yields increased after the Federal Reserve announced on Sept. 21 it would buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less to support growth under what is known as Operation Twist.

Orders for U.S. durable goods decreased 0.1 percent in August after a 4.1 percent gain in the previous month, the Commerce Department reported today in Washington. The median forecast of 77 economists in a Bloomberg News survey was for a 0.2 percent decrease.

Treasuries also dropped as Barroso called for the faster creation of a permanent-rescue fund and appealed to central bankers to use their powers as the ultimate line of defense against the debt crisis.

The European Stability Mechanism, due to begin in mid-2013, will wield a 500 billion-euro ($681 billion) fund that may be used more flexibly than the current guarantee-based temporary financial backstop.

“Things are a little bit better in Europe, but we’re still subject to tape bombs,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York.

--With assistance from Anchalee Worrachate in London. Editors: Dennis Fitzgerald, Paul Cox

To contact the reporter on this story: Susanne Walker in New York at

To contact the editor responsible for this story: Dave Liedtka at

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