By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices stayed under pressure on Monday, pushing yields up, after a report said consumer spending in December rose a little more than analysts expected.
Bonds were giving back some of the gains notched Friday as escalating protests in Egypt fueled a flight to the relative safety of U.S. debt.
Yields on 10-year notes (UST10Y 3.36, +0.03, +0.81%) , which move inversely to prices, rose 1 basis point to 3.34%. A basis point is 0.01 percentage point.
Yields on 2-year notes (UST2YR 0.55, +0.00, +0.73%) added 1 basis point to 0.56%.
Thirty-year-bond yields (UST30Y 4.57, +0.03, +0.71%) rose 2 basis points to 4.55%, still shy of the nine-month high touched early Friday before the Egypt-inspired rally. See story on Friday’s bond rally.
Consumer spending in December rose 0.7% while incomes rose 0.4%, the Commerce Department said.
“Stronger spending came at the expense of a decline in the savings rate, and we need to see a step up in job creation (which we think is underway) to support spending gains at close to the pace seen in the fourth quarter,” economists at RDQ Economics wrote in a note.
Still to come is a Federal Reserve buyback of 2013-2014 Treasury debt. The U.S. central bank will buy bonds every day this week, adding to the $351 billion of debt it has bought since August. See recent Fed buyback results.
The buybacks are part of the Fed’s second round of quantitative easing to keep interest rates from rising too much. They include purchases made under a previous program to reinvest cash from its maturing mortgage-related holdings back into Treasury securities.
The buybacks have limited a decline in Treasury prices even as economic data continue to improve. Friday brings what’s arguably each month’s most important economic report: the Labor Department’s employment report.
Analysts also noted that some buying may come from fund managers who aim to match shifts in benchmark bond indexes at the end of each month.
”Ten-year notes remain in their well-defined range between 3.25% and 3.55%,” said strategists at RBS Securities. “We’ll just have to watch these rate ranges, with a close outside of them remaining an important signpost of market health.”
