U.S. Treasuries fell, with 10-year notes snapping a three-day gain, on speculation
yields aren't high enough to compensate for the risk that inflation will accelerate. The
drop pushed the 10-year note yield up from the lowest level in almost two months after
Federal Reserve policy makers, led by Chairman Ben S. Bernanke, signaled they are
now more concerned about containing inflation than bolstering economic growth. The
U.S. plans to sell $8 billion of 10-year Treasury Inflation Protected Securities today.
The yield on the benchmark 10-year note increased 4 basis points to 3.85 percent by
7:34 a.m. in New York, according to bond broker BGCantor Market Data. The 3.875
percent security due May 2018 fell 11/32, or $3.44 per $1,000 face amount, to 100
7/32. A basis point is 0.01 percentage point. The yield dropped to 3.81 percent
yesterday, the lowest level since May 22. The two-year note yield rose 6 basis points
to 2.43 percent. By year-end the 10-year note yield will climb to 4.25 percent and the
two-year yield to 3.1 percent, Purps predicted. The market is relatively unchanged to
.125 worse this morning.
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