Treasury Yields Continue to Rise

Yields on Treasury securities continued to climb Monday, signaling that bond investors believed that the economy was improving and that the Federal Reserve would not pause soon in its credit-tightening campaign.

The 10-year Treasury note yield ended at 4.22%, up from 4.17% on Friday and the highest level since May 9.

Shorter-term Treasury rates also rose. The yield on new six-month T-bills sold at the government’s weekly auction was 3.53%, the highest in four years and up from 3.46% a week earlier.

The two-year T-note ended at 3.89%, also a four-year high and up from 3.85% on Friday.

Analysts said traders saw no reason to bet on lower bond yields ahead of Federal Reserve Chairman Alan Greenspan’s testimony to Congress this week. He will speak on the economy to a House panel Wednesday and a Senate panel Thursday.

“The Fed has given no indication that they are going to pause,” said Colin Robertson, managing director of fixed income at Northern Trust Global Investments in Chicago.

The central bank has raised its key short-term rate nine times over the last year, to 3.25%.

Longer-term Treasury yields had slipped in April and May as some traders bet the economy was slowing enough to justify a halt to the Fed’s rate increases. But yields have rebounded in recent weeks amid stronger-than-expected economic reports.

“You see data that continues to support the view that the economy is on a sustainable path of growth,” said Wan-Chong Kung, a portfolio manager at U.S. Bancorp Asset Management in Minneapolis.

One piece of good news for the bond market Monday: The Treasury said foreign investors in May bought $27.6 billion more in Treasury issues than they sold, belying worries that overseas demand might wane for U.S. securities.

Including corporate bonds, stocks and other securities, foreigners increased their holdings of U.S. financial assets by $70.6 billion, compared with $54.1 billion in April.