Treasury 30-year bonds dropped as investors bet on faster inflation even as Federal Reserve Chair Janet Yellen dismissed signs of rising consumer prices.
Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina says “Fed officials will have to acknowledge the firming price environment.”
Benchmark 10-year notes fell for a third week after Yellen said June 18 that the Fed maintains its commitment to low interest rates. Gauges of expectations for consumer prices for periods from five to 30 years widened before the Commerce Department is forecast to report June 26 that the Fed’s preferred measure of inflation rose to the highest since October 2012. The Treasury will sell $107 billion of coupon debt next week.
“The market is voting with its feet and lifting rates because it doesn’t agree with Yellen’s conclusion on CPI,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York.
“The market does seem to be fighting the Fed here,” said James Caron, who manages money in New York at Morgan Stanley Investment Management, which oversees $61 billion of fixed-income assets. “The market believes it’s only a matter of time before those inflation pressures start to manifest.”
Source: Bloomberg/Reuters