Treasury notes fell before tomorrow’s Federal Reserve meeting, pushing 10-year yields to a six-month high, on speculation reports this week will add to signs the recovery is sustainable.
The extra yield investors demand to hold 10-year notes over 2-year debt was the highest since April as economists raised growth estimates after President Barack Obama’s agreement to extend tax cuts. Ten-year notes, which declined last week by the most since August 2009, also fell as stocks gained.
The yield on the 10-year note gained three basis points, or 0.03 percentage point, to 3.36% at Monday morning in New York, according to BGCantor Market Data. The price of the 2.625% security maturing in November 2020 fell 9/32, or $2.81 per $1,000 U.S. face amount, to 93 7/8. The yield earlier climbed to 3.39%, the highest level since June 3.
Two-year yields advanced two basis points to 0.67 percent after increasing to 0.69, the highest since June 23. The spread between 2- and 10-year yields touched 2.73 percentage points, the widest on an intraday basis since April 30.
Fed policy makers meeting may signal tomorrow that they are open to boosting debt purchases beyond the $600 billion U.S. already announced to spur job growth and avoid deflation.
Sustaining growth may be challenging without an improvement in the unemployment rate, which climbed to a seven-month high of 9.8% in November.
Retail sales rose for a fifth month in November, increasing 0.6%, as Americans began their holiday shopping, according to the median forecast of 62 economists in a Bloomberg News survey before tomorrow’s report from the Commerce Department. Sales rose 1.2% in October.
Production at factories, mines and utilities increased 0.3% in November after stalling in October, economists projected before a Fed report on Dec. 15.
Consumer prices excluding food and fuel costs rose 0.6% in November from a year earlier, matching October’s increase that was the smallest annual gain on record, according to a Bloomberg News survey before a report from the Labor Department on Dec. 15.
