U.S. 30-year bonds are headed for a fifth monthly gain in price, the longest run since 2006, as slow inflation and mixed economic data drives demand for long-term debt.
Treasury five-year yields were little changed Tuesday, while 30-year "long bonds" rallied as investors prepared bid for $35 billion of 2019 debt being auctioned Wednesday. The Treasury also plans to sell $13 billion of two-year floating-rate securities. The Federal Reserve will probably begin raising interest rates in the second half of next year, Fed Bank of Atlanta President Dennis Lockhart said Tuesday in Baton Rouge.
“Money is shifting to the longer end,” said Kazuaki Oh’e, a debt salesman at CIBC World Markets Japan Inc. in Tokyo. “If you think the Fed is going to raise rates, then short-term yields are going up, but not the longer end.”
Thirty-year yields have fallen to 3.36 percent from 3.97 percent at the end of 2013. The last time the yield slid for five months or longer was from June to November of 2006.
Employment and housing starts rose, while retail sales lagged expectations and figures on manufacturing were mixed, data showed this month. Orders for durable goods unexpectedly climbed in April, according to a government report Tuesday.
The Fed’s preferred gauge of inflation has been below its 2 percent target for almost two years.
The central bank is slowing the pace of bond purchases used to fuel growth. It has kept its benchmark interest rate close to zero since 2008. In the Fed’s rate projections issued March 19, the median year-end estimate among policy makers was 1 percent for 2015 and 2.25 percent for 2016.
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