Treasury notes poised for best week this year on Fed purchase

Treasury 10-year notes headed for the biggest weekly rally since December, after the Federal Reserve’s plan to buy as much as $300 billion in government debt led to the largest one-day surge in more than four decades.

US securities of all maturities advanced this week on speculation the Fed’s programme will put a ceiling on yields after the worst start to a year for Treasuries since 1980. Notes gained the most as the Fed said March 18 its purchases will concentrate on two- to 10-year maturities. Fed Chairman Ben S Bernanke may say in a speech on Friday the central bank will take additional measures to lower borrowing costs.

“It’s been a crazy week,” said Adam Brown, managing director and Treasury trader in New York at Barclays Capital Inc, one of the 16 primary dealers that trade with the Fed. “I would expect a trend toward lower yields.”

The yield on the benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 2.61 per cent at 11.14 am in New York, according to BGCantor Market data. The price of the 2.75 security due in February 2019 fell 5/32, or $1.56 per $1,000 face amount, to 101 6/32.

The 10-year yield fell 28 basis points this week, the most since the five days ended Dec. 19, as the yield plunged from a high of 3.05 per cent to a two-month low of 2.46 per cent after the Fed’s announcement.

The benchmark two-year note’s yield fell one basis point to 0.85 per cent. It has declined 11 basis points this week.

Stocks rose while crude oil headed for a fifth week of gains, the longest winning streak in 11 months, as investors bet the Fed’s measures will revive the economy.