US Treasury debt prices fell Friday as higher stocks nipped any safe-haven bidding for government debt, while investors worried about the price impact of a spate of debt supply next week. Benchmark yields briefly rose to 3.00 percent for the first time since mid-March, when the Federal Reserve announced it would be buying longer-dated Treasuries.
Economic data Friday generally lent to the bearish tone on bonds, with March durable goods orders slipping by less than expected while new home sales last month were stronger than expected. "It is again a little better than expected, and it is adding some encouragement to the idea that maybe the economy is flattening out here at the bottom," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
The idea that the economic tailspin may have found a bottom boosted stocks and undermined bonds. Bonds were also being hit, however, by worries over an expected pending wave of debt supply. The Treasury Department said Thursday it will auction a record $101 billion of securities next week. "Bonds are down mainly on the supply next week," said Tom di Galoma, head of US rates trading with Guggenheim Capital Markets in New York.
Benchmark 10-year US Treasury notes were trading 14/32 lower in price for a yield of 2.99 percent after briefly reaching 3.00 percent, and up from 2.93 percent late Thursday. Investors are now wondering whether the Fed will move at a policy meeting next week to extend its Treasury purchase program.
The program is intended to free up lending and lower interest rates like those on mortgages, and analysts have said three percent is a bit of an unofficial ceiling for the Fed for benchmark rates. Investors Friday were looking ahead to the government's expected release in the afternoon of outlines of the assumptions underlying stress tests for the 19 biggest financial institutions.
Investors are keenly interested in what the tests will reveal about the health of the struggling financial sector. The two-year Treasury note was trading 1/32 lower in price for a yield of 0.96 percent, up from 0.94 percent late on Thursday, while 30-year bonds were 1-10/32 lower for a yield of 3.87 percent from 3.79 percent. The 30-year yield was trading at the highest in more than five months.