Are Yields Signaling Slowdown?

Slide in U.S. Treasury yields since January counters rosier economic data.

The $10 trillion market for U.S. Treasuries is signaling that the economic recovery may be poised to weaken even as consumer confidence rises toward pre-recession levels.

Yields on 10-year Treasury notes, the benchmark for everything from mortgage rates to corporate bonds, fell as low as 1.89 percent yesterday, down from this year’s high of 2.09 percent on Jan. 23, according to data compiled by Bloomberg. The yield averaged 2.76 percent in 2011 and 3.19 percent in 2010.

Orders Tumble

Orders for durable goods fell in January by the most in three years. Bookings for goods meant to last at least three years slumped 4 percent, after a revised 3.2 percent gain the prior month, data from the Commerce Department showed yesterday in Washington. Economists projected a 1 percent decline, according to the median forecast in a Bloomberg News survey.

Forward Rates

Traders are betting that government debt yields will remain subdued. The cost to exchange fixed-for floating-rate payments in a decade has averaged 3.41 percent this year. The so-called forward 10-year swap rate, which has fallen from last year’s peak of 5.47 percent in February, is trading at the same levels as early 2009 during the depths of the financial crisis.

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