Treasuries Decline After Bullard Says Fed Should Review QE2

Treasuries fell, pushing 10-year yields to the highest in more than two weeks, on speculation the Federal Reserve may end its debt-purchase program early as the world’s biggest economy shows signs of a sustained recovery.

Five-year U.S. notes fell for an eighth day, the longest streak since before the collapse of Lehman Brothers Holdings Inc. St. Louis Federal Reserve Bank President James Bullard said on March 26 policy makers should review whether to complete $600 billion of Treasury purchases, a policy known as quantitative easing. Reports this week will show consumer spending rose in February, while the economy added more jobs last month, according to surveys of economists by Bloomberg.

“The market is concerned about how soon QE2 will be terminated, or whether they will even stop short of implementing the full package,” said Philip Marey, a senior market economist at Rabobank Groep in Utrecht, Netherlands. “It’s going to be difficult for yields to go much lower when the longer-term perspective is that the U.S. economy is recovering, inflation is rising and there’s talk of an early exit for QE2.”