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Treasury 10-Year Notes Snap Nine-Day Drop, Longest Since

Published: March 20, 2012 | 8:10 am
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Treasury 10-year notes rose, snapping a nine-day slide that was the longest losing run since 2006, as yields climbed to levels that attracted investors.
The 14-day relative strength index for 10-year rates was at a level indicating yields may not climb much more. The index was 76.5 yesterday, exceeding 70 for a fourth day. A figure of more than 70 suggests to some traders that rates may be about to reverse direction. A 10th decline today would be the longest stretch since April 1974 following the OPEC oil embargo.
Ten-year yields fell three basis points, or 0.03 percentage point, to 2.35 percent at 7:29 a.m. in London, according to Bloomberg Bond Trader prices. The 2 percent securities due in February 2022 rose 7/32, or $2.19 per $1,000 face amount, to 96 29/32. The rate climbed to as high as 2.39 percent yesterday, the most since October.
“Yields overshot,” said Will Tseng, who trades the securities at Taipei-based Shin Kong Life Insurance Co., which has the equivalent of $52.1 billion in assets. “I will definitely jump in” if rates rise further. Tseng said he is planning to buy 10-year notes at 2.4 percent.
Treasuries fell yesterday after the Federal Reserve raised its assessment of the economy last week, reducing speculation that it is planning additional asset purchases known as quantitative easing.

Signs of Recovery

“The data have been getting better,” said Roger Bridges, who oversees the equivalent of $15.9 billion of debt as the Sydney-based head of fixed income at Tyndall Investment Management Ltd., a unit of Nikko Asset Management Co. “U.S. 10- year notes still look expensive.” Bridges said he is holding fewer Treasuries than the percentage in the benchmark he uses to gauge performance.
Housing starts probably rose to a 700,000 annual rate last month from a 699,000 pace in January, according to the median estimate of economists surveyed by Bloomberg News before the Commerce Department report today. The figure would be the strongest reading since November’s three-year high of 702,000.
The increase in Treasury yields helped push up real estate borrowing costs, with the average U.S. 30-year fixed mortgage rate rising to a four-month high of 4.05 percent, according to Bankrate.com in North Palm Beach, Florida.
Fed Bank of New York President William C. Dudley said yesterday that policy makers may raise interest rates sooner or later than 2014, in a speech in Melville, New York. Fed said in its statement last week that it will probably keep the benchmark close to zero through at least the later part of that year.
Bank of America Merrill Lynch’s MOVE index, which measures price swings based on options, rose to 92.3 basis points yesterday. It was the highest level this year.


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