By Daniel Kruger and Sam Goldfarb
Yields on longer-term U.S. government debt climbed Friday after the Treasury Department said it would begin selling 20-year government bonds later this year.
The yield on the benchmark 10-year Treasury note rose for a second consecutive trading session, settling at 1.834% from 1.809% Thursday. The jump in yields, which rise when bond prices fall, reflects investors' expectations for a growing supply of government debt.
Larger budget deficits, which are expected to remain in the trillions of dollars over the next decade, have led the government to seek new ways to attract investors to its securities. The Treasury had also been considering selling bonds with maturities of 50 and 100 years, though some analysts questioned demand for those securities and bond dealers showed little interest in the idea.
The Treasury last sold 20-year bonds in March 1986.
"The fiscal deficit is going to be $1 trillion as far as we can see, so they need to increase the supply," said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management Inc.
Investors were anticipating the announcement but expected it to happen later in the year -- after tax season -- when the Treasury's cash needs are typically greater, Mr. Ren said. The government spent $1.02 trillion more in 2019 than it took in, the Treasury said Monday, the highest calendar-year deficit in seven years.
Yields also rose after the Commerce Department said Friday that housing starts increased 16.9% in December from the previous month, a sign that confidence in the economy remains strong at a time when low interest rates are making homes more affordable for prospective buyers, analysts said.
Some investors said the introduction of the 20-year bond could add momentum to an already popular trade: betting that long-term yields will rise faster than shorter-term ones in the coming months.
Short-term yields could remain low because they are particularly sensitive to central bank policy and the Federal Reserve has signaled it won't raise interest rates anytime soon. At the same time, improvement in U.S. economic data could put upward pressure on longer-term yields.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, recently rose 0.2% to 90.44.
Write to Daniel Kruger at Daniel.Kruger@wsj.com and Sam Goldfarb at firstname.lastname@example.org
(END) Dow Jones Newswires
January 17, 2020 16:51 ET (21:51 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.