Treasuries decline as job report suggests support for QE tapering

WASHINGTON: Treasuries fell for the first time this week as better-than-forecast data on jobless claims and regional manufacturing suggested a strengthening economy will allow the Federal Reserve to slow asset purchases. Benchmark 10-year note yields touched a two-week low on Wednesday after Fed chairman Ben S Bernanke said in testimony before that the central bank’s bond buys “are by no means on a preset course” and could be reduced more quickly or expanded as economic conditions warrant.

Federal Reserve chairman Ben S Bernanke said on Thursday that one reason for the recent rise in long-term interest rates is the unwinding of leveraged and “excessively risky” investing. “It’s probably a good thing to have that happen although the tightening that’s associated with that is unwelcome,” he said in response to a question from the Senate Banking Committee on Thursday in Washington.

The climb in market interest rates could also be attributed to improved economic data and investor reactions to the Fed’s communications, Bernanke said on Thursday.

“We’re in a recovery phase, albeit slower than most people thought it was going to be," said James Caron, who manages money in New York at Morgan Stanley Investment Management, which oversees $62 billion in fixed income assets. “The overarching message is still the Fed is looking to remove some accommodation at some point in time, and the market’s having a difficult time rallying even on dovish comments."

Jobless claims dropped by 24,000 to 334,000 in the week ended July 13, the fewest since early May, from a revised 358,000 the prior period, US labor department figures showed on Thursday.