Treasuries rose for a third day as DoubleLine Capital LP’s Jeffrey Gundlach said yields are poised to fall further and Pacific Investment Management Co.’s Bill Gross cut his holdings of U.S. government-related debt.
Gross, manager of the world’s biggest bond fund, reduced the allocation in his $236 billion Total Return Fund to 43 percent in February from 46 percent a month earlier as the Federal Reserve cut its bond-buying program, data on Pimco’s website showed yesterday. Gundlach, the founder of Los Angeles- based DoubleLine Capital, said yesterday on a webcast that 10- year yields will slide to 2.5 percent this year as the Fed tapers amid a slowing global economy.
“Sell what the Fed has been buying because they won’t be buying them when taper ends in October,” Gross, who is based in Newport Beach, California, wrote on Twitter last week.
The yields on the benchmark 10-year note fell four basis points, 0.04 percentage point, to 2.73 percent as of 5 p.m. in New York, Bloomberg Bond Trader data show. They dropped as much as six basis points, the most since March 3. The 2.75 percent note due in February 2024 rose 10/32, or $3.13 per $1,000 face amount, to 100 5/32.
Gross and Gundlach differ as investors try to discern how much the weather slowed the world’s biggest economy. Treasury benchmark 10-year yields have fallen about a quarter percentage point this year, contrary to the predictions of analysts who expected borrowing costs to rise, as winter storms slowed housing, consumption and employment.
The U.S. sold $21 billion of 10-year notes today at a lower-than-forecast yield of 2.729 percent.
Yield Forecasts
Benchmark 10-year yields will rise to 3.4 percent by year- end, based on a Bloomberg survey of economists, with the most recent forecasts given the heaviest weightings.
Fed Chair Janet Yellen said last month the central bank will probably maintain its strategy of trimming bond purchases under its quantitative-easing stimulus program. Policy makers reduced purchases by $10 billion in January and again in February, to $65 billion. The central bank’s next meeting is March 18-19.
While job gains failed to meet expectations in December and January, U.S. employers added 175,000 positions in February, beating the projection of 149,000 among economists in a Bloomberg News survey, Labor Department figures March 7 showed.