By Cynthia Lin
U.S. Treasury prices edged up on Friday, stalling three straight
selling sessions as bond investors remain on edge about how the
Federal Reserve might update its policy next week.
Benchmark 10-year notes rose 1/32 in price to yield 2.273%. The
30-year bond rose 2/32 to yield 3.042%. Bond yields decline when
prices rise.
For the week, the 10-year yield rose 0.075 percentage point,
marking the first increase in six weeks.
Friday's gains partially offset recent selling in the market,
keeping the 10-year yield locked in a 2.1% to 2.3% range. While the
U.S. economy has shown slow but steady progress, an array of
uncertainties around the world, ranging from eurozone growth
concerns to the threat of Ebola, have kept market participants
invested in safe-haven Treasurys.
"This could leave markets in a state of limbo over the next
several days as investors reassess the prospects of the [Fed's
policy committee] acknowledging recent market volatility and
increasing uncertainty about global growth in their" statement,
said Gennadiy Goldberg, U.S. strategist at TD Securities.
The Fed's policy-setting board gathers next week and is
scheduled to deliver a policy statement on Wednesday. While the
central bank's bond-buying program is widely expected to conclude
next week, the Fed has shown steadfast patience in keeping rates
low for longer to help the U.S. economy weather potential
snags.
Among those risks is the eurozone's lack of growth and
inflation, which has raised worries about weighing down the U.S.
recovery. Geopolitical issues and the threat of Ebola have also
fueled demand for safer assets. Reports of a doctor testing
positive for Ebola in New York City late Thursday provided a boost
in Treasurys, bond traders say.
"When you add together all the pieces that create uncertainties,
you get this constant bid for Treasurys," said Sean Simko, head of
fixed-income management at SEI Investments. "Even now with [U.S.]
growth picking up, it's not at a pace that warrants 4%" yield on
10-year notes.
In a year when yields were widely expected to trend higher, the
bouts of buying in Treasurys have forced many to lower their
year-end forecasts on the 10-year yield. In the wake of a sudden
mid-October rally that dragged the 10-year yield as low as 1.85%,
few analysts see the yield ending this year back around 3%.
Goldman Sachs' interest-rate strategy team lowered its year-end
call to 2.5% from 3%, while J.P. Morgan cut its call to 2.45% from
2.7%.
To be sure, such forecasts still point to higher yields than the
current 2.25%. That suggests selling pressure on Treasurys in the
coming months, with analysts expecting U.S. economic data to shine
through and global uncertainties to wane.
COUPON ISSUE PRICE CHANGE YIELD CHANGE
1/2% 2-year 100 7/32 up 0/32 0.386% -0.8BP
7/8% 3-year 100 6/32 up 1/32 0.814% -0.8BP
1 5/8% 5-year 101 7/32 up 2/32 1.492% -0.2BP
2% 7-year 101 6/32 up 1/32 1.938% -0.7BP
2 3/8% 10-year 100 30/32 up 1/32 2.273% -0.3BP
3 1/8% 30-year 101 20/32 up 3/32 3.041% -0.5BP
2-10-Yr Yield Spread: +188.7 BPS Vs +188.2 BPS
Source: Tradeweb/WSJ Market Data Group
Write to Cynthia Lin at cynthia.lin@wsj.com