Treasury 10-year notes dropped, pushing yields up the most in almost six months, as data showed the US economy is strengthening and the European Central Bank moved to keep credit flowing amid the euro area's debt crisis.
Yields on 30-year bonds had the biggest weekly gain since October as claims for jobless benefits in the US unexpectedly fell and orders for durable goods climbed. Consumer confidence jumped this month the most since July, data next week may show.
"There's a bias for optimism," said Jim Vogel, an interest-rate strategist in Memphis, Tennessee, at FTN Financial. "Sentiment is always looking for better data; that's the way the market is thinking right now. With a period of stability in Europe, you have time to think. We'll look at the road forward." Ten-year note yields rose 18 basis points, or 0.18 percentage point, to 2.02 per cent on Friday in New York, from 1.85 per cent on December 16, according to Bloomberg Bond Trader prices.
It was the biggest increase since yields on the benchmark note advanced 32 basis points in the five days ended on July 1. The 2 per cent securities due in November 2021 dropped 1 19/32, or $15.94 per $1,000 (Dh3,670) face amount, to 99 25/32. Yields on 30-year bonds increased 21 basis points to 3.06 per cent, the most since the week ended October 14. Two-year note yields increased six basis points to 0.28 per cent.
The gap between yields on two- and 30-year securities, known as the yield curve, widened on Friday to 277 basis points, the most since December 13. The 2011 low was 249 basis points on October 3, and the average for the year is 348 basis points. The increase in 30-year yields this week pared their drop for 2011 to 127 basis points, which still would be the biggest annual reduction since 2008. Long bonds have returned 33 per cent in 2011, more than triple the 9.3 per cent gain in the broader Treasury market, Bank of America Merrill Lynch indexes show.
Yields on 10-year debt have also fallen 127 basis points in 2011, the most in three years. They touched a record low 1.67 per cent in September. The benchmark notes have returned 16.3 per cent, according to a Bank of American Merrill Lynch index.
Treasuries slipped on December 21 as the ECB said it would lend euro-area banks more than economists forecast in three-year loans to restore confidence in sovereign borrowers.