Yields rise as corporate debt sales weigh

NEW YORK: US Treasury yields rose on Monday as large sales of corporate debt pressured prices and as investors continued to question whether the Federal Reserve is likely to raise interest rates in the coming months.

Pharmaceutical company Actavis on Monday was marketing bonds that are expected to total $22 billion, the second largest amount ever sold by a corporate borrower.

"Corporate deals are weighing on the market, and we've heard of some allocation out of bonds into equities," said Sean Murphy, a Treasuries trader at Societe Generale in New York.

Some companies are likely trying to sell debt before the Federal Reserve begins raising interest rates, which some expect may begin in June.

"A lot of guys are looking at what is going on with the Fed and trying to figure out whether or not the rate rise is going to be any time soon, and looking to get some deals out before any of that transpires," Murphy said.

Benchmark 10-year Treasuries were last down 25/32 in price to yield 2.08 percent, the highest since February 24.

Some investors and analysts expect that the Fed will drop the word "patient" in its forward guidance at this month's meeting, held on March 17-18, paving the way for a possible rate rise in June. The Fed said in December that it will be patient in raising rates, replacing its former pledge to keep rates near zero for a "considerable time."

The main focus for the market this week will be Friday's employment report for February. Employers are expected to have added 240,000 jobs in the month, according to the median estimate of 100 economists polled by Reuters.

"It's going to be on payrolls' shoulders to show the market that things aren't slowing down that much," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

"If you have a weaker payroll print and underperformance in wage growth that could have serious implications for whether the word 'patient' is removed at the March meeting, and that could lead to very considerable repricing for Fed hikes," Goldberg said.

Expectations that the Federal Reserve could hike rates by mid-year rose in February after a strong US employment report for January and stronger core consumer prices data, helping the bonds post their biggest monthly loss since May 2013.