U.S. 10-Year Treasury Note May Extend Biggest Weekly Decline Since May

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Ried, Thunberg & Co.'s index on the outlook for government securities was little changed at 41 on Feb. 18. Readings below 50 mean the 41 international money managers surveyed expect 10-year note prices to b]e lower by the end of March. Participants in the survey by the Jersey City, New Jersey-based bond-research firm said they reduced the amount of U.S. government securities in their combined $1.32 trillion of assets.

Ten-year notes fell last week after Federal Reserve Chairman Alan Greenspan said interest rates are still ``fairly low'' and a measure of producer prices rose the most in more than six years. Bond investors said they anticipate a government report on Feb. 23 will show consumer prices increased last month. Inflation erodes the value of fixed-income payments.

``The economy continues to grow at a reasonably good pace, and there's some inflationary pressures brewing,'' said Gary Pollack, head of fixed-income trading and research at Deutsche Bank Private Wealth Management in New York, which manages $12 billion of bonds. ``Given those two facts, the yield on the 10- year is probably too low.''

The benchmark 4 percent note maturing in February 2015 last week fell about 1 3/8, or $13.75 per $1,000 face amount, to 97 27/32 in New York, according to bond broker Cantor Fitzgerald LP. The yield increased 18 basis points to 4.27 percent, the most since the period ended May 7, when it rose 27 basis points. A basis point is 0.01 percentage point.


Bloomberg