US Treasury debt prices rose on Friday after a three-day losing streak, as long-dated government debt led the market higher, supported by purchases of 30-year bonds by the Federal Reserve. The Fed bought $1.97 billion of Treasuries maturing between February 2036 and May 2041 as part of its "Operation Twist" to stimulate lending and economic growth.
Under the operation, the central bank has sold shorter-dated securities and bought longer-term bonds to help keep long-term interest rates low. "The Fed is a heavy buyer in the long end," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.
Benchmark 10-year notes rose 12/32 in price to yield 1.99 percent, down from 2.03 percent late Thursday. The 30-year bond rose 17/32 to yield 3.12 percent from 3.14 percent on Thursday. "After three days of selling we were due for a bit of a correction," said Jack Bauer, managing director of fixed income at Manning & Napier in Fairport, New York. "Then stocks were a little weaker and Treasuries tend to benefit from that."
Analysts said data on dealer positions pointed to long positions having been created in anticipation of the month's end. Some of the most recent selling in the bond market was linked to those positions being unwound, they said. Nonetheless, riskier assets had the upper hand in January and February as investors have become less anxious about the economic outlook and the stability of the financial system.
Benchmark 10-year yields are trading very near the middle of a range of 1.79 percent to 2.17 percent that has held since early November. The current yield for 10-year notes is not far off the closing yield from last Friday of 1.98 percent. Next week, the bond market's main focus is expected to be the US Labour Department's monthly payrolls data. Economists polled by Reuters estimate non-farm US payrolls added 210,000 jobs in February after adding 243,000 jobs in January. They expect unemployment to remain at 8.3 percent.
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