Treasury Yields Climb to Highest Since 2011 as Tapering to Begin...Gold To Soar

New York (Jan 4)  Treasury yields rose to the highest levels since 2011 as the Federal Reserve prepared to start cutting bond purchases amid data that signaled the recovery of the world’s biggest economy is picking up speed.

Ten-year note yields exceeded 3 percent and 30-year (USGG30YR) yields approached 4 percent before a report forecast to show the unemployment rate held at a five-year low. Fed Chairman Ben S. Bernanke said yesterday the headwinds that have held back the U.S. economy may be abating. A gauge of traders’ outlook for inflation rose to a three-month high. The Treasury is scheduled to sell $64 billion of notes and bonds next week.

“The Fed has been extraordinarily accommodative for the last five years, and I think overall that’s built up some momentum in the economy,” said Richard Bryant, a trader at Mizuho Securities USA Inc. in New York, one of the 21 primary dealers that trade with the central bank. “People are more convinced than they have been in years past that 2014 could be the year where we get the move to higher yield levels that people have been predicting.”

The 10-year note yield ended the week little changed at 2.99 percent in New York, according to Bloomberg Bond Trader data, as investors attracted by its high level pushed it below 3 percent. It reached 3.05 percent, the most since July 2011, on Jan. 2. The price of the benchmark 2.75 percent security maturing in November 2023 rose 1/32, or 31 cents per $1,000 face amount, to 97 29/32.

Thirty-year bond yields slipped one basis point, or 0.01 percentage point, to 3.92 percent after reaching 3.97 percent Jan. 2, the highest since August 2011. The yield on the five-year note dropped one basis point to 1.73 percent, the first weekly loss since Nov. 15.

Gold-Eagle Forum poster Stankovich has hit the nail on the head with his Bear Market Forecast for T-Bonds...and it effect of fuelling gold to new record all-time highs.  This is a MUST READ: