Treasurys mark third week of losses after Fed

NEW YORK (MarketWatch) — Treasury prices marked the largest three-week loss since December as investors continued to adjust portfolios on Friday after the Federal Reserve reset expectations about monetary policy.

The U.S. central bank on Wednesday told market participants that it was in no rush to raise interest rates, continuing to commit to long-running low-rate policies, despite signs of a pickup in the labor market and inflation.

However, with economic data that appears to be getting stronger, market participants are tuning into the numbers with more interest to see how that may impact the course of Fed policy. That was one factor that pushed long-term yields sharply higher on Thursday in what's known as a steepening yield curve . Shifts in the tone of economic data, particularly with regards to rising inflation , may leave the market open to quick reactions, especially with thin trading volume exacerbating moves, strategists said.

/quotes/zigman/4868283/delayed 10_YEAR 2.61, -0.0030, -0.11% 10-year Treasury note yield

Treasury prices swung higher Friday amid some early buying ahead of the end of the quarter, according Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund, who said it was otherwise a quiet trading day.

"We're starting to see a much bigger buyer of Treasurys, namely banks as they put higher quality demand on the balance sheet," Stith said.

The 10-year Treasury note (10_YEAR) yield, which moves lower as prices rise, slipped 1 basis point to 2.610%, though it climbed as high as 2.659% in morning trade, according to Tradeweb. The benchmark yield rose 2.5 basis points on the week, and 16.5 basis points over the past three weeks.

The 30-year bond (30_YEAR)  yield fell 2.5 basis points on the day to 3.437% and the 5-year note (5_YEAR)  yield half a basis point to 1.684%. The spread between them narrowed, cutting back the prior session's steepening.

The Fed's slow, methodical approach toward normalizing monetary policy is likely to help bolster credit markets in the meantime, even as corporate bonds have become a crowded trade, according to Ashish Shah, co-head of global credit at AllianceBernstein.

"I think we are reasonably range-bound until the end of the year," Shah said, referring to the premium investors receive for holding credit. "There may always be periods of widening, but I think there are a lot of investors out there that would like to add to their positions."

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