Treasury 30-Year Yields Rise Most in 14 Months on Prospects for Inflation

By Daniel Kruger and Susanne Walker -Bloomberg News

Treasury 30-year bonds tumbled, pushing yields to the biggest weekly increase since August 2009, on speculation that Federal Reserve efforts to spur the economy will reignite inflation.

The 30-year yield rose above 4 percent yesterday for the first time in two months after data showed retail sales rose more than forecast and New York area manufacturing climbed. Fed Chairman Ben S. Bernanke said additional stimulus may be warranted, in part because inflation is too low. The Fed will release its regional economic survey next week. The U.S. sold $66 billion of notes and bonds to lower-than-average demand.

“Out to 30 years, they’re looking and saying, ‘With the fire-power the Fed can bring to bear, is it really something I feel comfortable with?’” said Mitchell Stapley, the Grand Rapids, Michigan-based chief fixed-income officer for Fifth Third Asset Management, which oversees $22 billion. “People are saying no.”

The yield on the so-called long bond climbed 23 basis points, or 0.23 percentage point, to 3.98 percent, from 3.75 percent on Oct. 8, according to BGCantor Market Data. It touched 4.01 percent yesterday, the most since Aug. 10. The increase was the biggest since a 31-basis point jump for the five days ended Aug. 7, 2009. The 3.875 percent security due in August 2040 dropped 4 3/32, or $40.94 per $1,000 face amount, to 98 5/32.

The 10-year note yield rose 17 basis points, the most since December, to 2.56 percent, from 2.39 percent last week. It was the yield’s first weekly gain since Sept. 10. The five-year note yield also increased for the first week in more than a month, adding eight basis points to 1.19 percent.

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