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Bonds drop after upbeat Fed statement
March 14, 2012 / 5:07 AM / 6 years ago

Bonds drop after upbeat Fed statement

TOKYO (Reuters) - Treasuries extended losses in Asia on Wednesday, with the 30-year bond yield creeping to a fresh more than four-month high, as equities surged after the U.S. Federal Reserve highlighted signs of strength in the economy.

A man smiles as he talks on a mobile phone in front of an electronic monitor displaying share prices outside a brokerage in Tokyo March 14, 2012. REUTERS/Yuriko Nakao

The central bank said after a regular meeting of the Federal Open Market Committee on Tuesday that it expects “moderate” growth over coming quarters along with a gradual decline in the unemployment rate.

While the Fed said it plans to continue to hold interest rates near zero through late 2014, some took the latest statement as a sign that a third round of stimulative quantitative easing is no longer in the cards.

“The U.S. economy has been showing signs of improvement, and now the FOMC has come out and said so. Some view this as removing the chances of QE3, although the central bank still appears to be committed to keeping its easy policy,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities.

“Because of the inflation risks, the longer end is under more pressure,” he added.

MSCI’s index of Asia Pacific shares outside of Japan was up more than 1 percent by early afternoon.

The yield on the 10-year note rose to 2.14 from 2.13 percent in late U.S. trading, well above 2.04 percent in Asia on Tuesday.

The yield on 30-year Treasuries rose to 3.29 percent from 3.26 percent in late U.S. trading and was also above 3.18 percent in Asia on Tuesday.

The U.S. Treasury will auction $13 billion of reopened 30-year bonds on Wednesday.

A sale of $21 billion of reopened 10-year notes on Tuesday met solid demand, as did Monday’s sale of $32 billion in three-year notes.

Also undermining demand for fixed-income products, data showed the largest gain in U.S. retail sales in five months in February, pointing to healthy U.S. consumer confidence.

Reporting by Lisa Twaronite; Editing by Richard Pullin

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