Aug. 19 (Bloomberg) -- Treasury yields jumped to the highest level since 2011 amid swelling speculation the Federal Reserve will trim its bond purchases next month. Emerging-market stocks fell for a third day and industrial metals slid, while U.S. shares fluctuated.
Ten-year Treasury yield increased seven basis points to 2.89 percent and yielded 41 basis points more than bonds in an index of debt from the Group of Seven nations, the highest since May 2010. The MSCI Emerging Markets Index slipped 1.5 percent as India’s rupee dropped to a record against the dollar. The Standard & Poor’s 500 Index swung between gains and losses near a five-week low. Italy and Greece led Europe government bonds lower. Corn added more than 3 percent and soybeans surged 2.8 percent, while copper slid 1.3 percent.
U.S. home sales probably climbed to a three-year high, data is forecast by economists to show Aug. 21, the same day minutes of the Federal Open Market Committee’s July meeting are released. Slowing economic growth in countries from India to Indonesia is driving investors to pull funds from emerging markets, spurred by speculation the Federal Reserve will taper its stimulus program.
"There is a bad mood coming from America, tapering is coming," Robert Halver, head of capital markets research at Baader Bank AG in Frankfurt, said in a telephone interview. "It’s a new world, terra incognita, for what tapering could mean for the market as we have no historical benchmark."
Officials will probably begin to scale back their $85 billion in monthly asset purchases in their program of quantitative easing next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13.
Yields on 10-year Treasury notes will rise above 3 percent as the Fed scales back its debt purchases, according to Rick Rieder, chief investment officer for fundamental fixed-income at BlackRock Inc.
The Fed’s quantitative easing "is too big," Rieder said in an interview with Tom Keene and Sara Eisen on Bloomberg Television. "You have got to taper down QE. It has created this tremendous distortion in interest rates. We think fair value on the 10-year is close to 3-to-3.25 percent. You are getting very close to there."
The yield on 10-year Treasury note extended last week’s 25 basis-point increase. Italy’s 10-year bond yield climbed 10 basis points to 4.28 percent and rates on Spanish, Swedish, Dutch and U.K. debt of similar maturity increased more than four basis points.