Treasuries Decline as Job Gains Foreshadow Fed Rate Rise

Treasuries fell for the first time in three weeks as more-robust-than-projected jobs gains last month lifted odds the Federal Reserve would increase interest rates by mid-2015. Two-year note yields reached the highest level in more than three years as shorter-term U.S. securities posted the largest losses. Improving U.S. labor conditions fueled speculation of higher Fed policy rates in 2015, while declining crude oil prices kept inflation estimates in check. The Treasury will sell $59 billion in notes and bonds next week. “The Fed is really going to be in play in 2015, and maybe even more aggressive than we thought,” said Eric Green, head of U.S. rates and economic research at Toronto-Dominion Bank’s TD Securities unit in New York. “Longer-term debt is being supported, for now, as low-inflation expectations remain, given lower oil prices and an uncertainty as to how low they will go.” Two-year note yields gained 18 basis points this week, or 0.18 percentage point, to 0.65 percent in New York time, according to Bloomberg Bond Trader data. The 0.5 percent securities maturing in November 2016 lost 11/32, or $3.44 per $1,000 face amount, to 99 23/32. The yield reached the highest level since April 28, 2011. Treasury 10-year note yields rose 14 basis points to 2.31 percent, while 30-year bond yields added eight basis points to 2.97 percent. By Liz Capo McCormick and Daniel Kruger