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Treasuries Drop First Time in 3 Days as Minutes Support Tapering

July 10, 2013

July 10 (Bloomberg) -- Treasuries dropped for the first time in three days after minutes of the Federal Reserve’s last meeting showed policy makers remain committed to slowing asset purchases.

Government debt fell earlier as the U.S. sale of $21 billion in 10-year notes produced the highest yield since July. Chairman Ben S. Bernanke said in a press conference after that June 18-19 meeting that the Fed may trim its bond-buying program this year and halt it around mid-2014 if economic performance tracks the central bank’s forecast. He speaks on policy at 4:10 p.m. in Boston.

"The Fed is going to taper at some point -- the buying is going to stop at some point," said Paul Montaquila, fixed- income investment officer with BNP Paribas SA’s Bank of the West and BNP Paribas Securities Corp. "There was clearly a reaffirming of the non-committal rhetoric we’ve heard for some time. I guess you can connect the dots."

The yield on the current 10-year note rose five basis points, or 0.05 percentage point, to 2.68 percent at 3:03 p.m. in New York, according to Bloomberg Bond Trader prices. Yields have risen from 1.62 percent on May 3.

The notes sold today drew a yield of 2.67 percent, compared with a forecast of 2.68 percent in a Bloomberg News survey of 10 of the Fed’s primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.57, compared with 2.53 at the last auction, the lowest since August 2012, and an average of 2.84 for the past 10 sales.

 

Labor Market

 

"Many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases," according to the record of the Federal Open Market Committee’s June gathering released today in Washington.

Today’s minutes also said "several members judged that a reduction in asset purchases would likely soon be warranted." Those members said the "cumulative decline in unemployment since the September meeting and ongoing increases in private payrolls" had increased their confidence that the labor market had improved, the minutes showed.

 

--With assistance from Daniel Kruger and Kenneth Pringle in New York. Editors: Kenneth Pringle, Dave Liedtka

 

To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net

 

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

 

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