Treasury inflation-adjusted yields were near a 14-month low before a report that economists said will show the annual increase in U.S. consumer prices held at the fastest pace since 2012.
Ten-year notes yield about 37 basis points more than the consumer price index. The difference shrank to 32 basis points last week, the narrowest since April 2013. Investors buying Treasurys as a haven from unrest in Ukraine and Gaza pushed yields down over the past week, raising concern Treasurys are approaching levels money managers will find unattractive.
“Even though there’s geopolitical tension, the U.S. bond market is not the best place to invest,” said Hiroki Shimazu, the senior market economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-largest publicly traded bank. “Inflation pressure is much higher than expected. Equities will be better.”
The benchmark U.S. 10-year yield was little changed at 2.47 percent at 10:14 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 2.5 percent note maturing in May 2024 was 100 1/4. The yield dropped to 2.44 percent on July 17, the lowest level since May 29.
Consumer prices rose 2.1 percent in June from a year earlier, based on a Bloomberg News survey before today’s Labor Department report. The figure would match May’s increase, which was the most since October 2012. On a monthly basis, prices increased 0.3 percent in June, versus 0.4 percent in May, based on the responses from economists.
Pro-Russian rebels released bodies gathered from the crash site of the Malaysian jet that was shot down over eastern Ukraine last week.
U.S. Secretary of State John Kerry arrived in Cairo to mediate a truce that would end fighting in Gaza.
Treasurys have returned 3.5 percent this year through yesterday, according to Bloomberg World Bond Indexes. The Standard & Poor’s 500 Index gained 8 percent including reinvested dividends.
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