BLBG: Treasuries Little Changed as $10 Billion Bond Auction Looms
By Cordell Eddings and Sandra Hernandez
Nov. 13 (Bloomberg) -- Treasuries were little changed, erasing earlier gains, as traders prepared for a sale of $10 billion of 30-year U.S. bonds.
The gap between yields on two- and 10-year notes widened to 2.55 percentage points, the most in five years, as the shorter- maturity debt outperformed. First-time unemployment claims rose last week to a seven-year high. Retailer Wal-Mart Stores Inc. lowered its earnings forecast, and chipmaker Intel Corp. dropped its sales estimate. Traders boosted bets the Federal Reserve will cut interest rates.
``There's just a lot of uncertainty in the market right now,'' said Ian Lyngen, an interest-rate strategist in Greenwich, Connecticut, at RBS Greenwich Capital, one of the 17 primary dealers that trade debt with the Federal Reserve. ``Generally people are buckling down as the impact on the consumer continues to be wrenching. At the same time, bailouts may be extended to auto companies and other industrial sectors, increasing uncertainty in the market.''
The benchmark 10-year note's yield fell 1 basis point, or 0.01 percentage point, to 3.73 percent at 8:44 a.m. in New York, according to BGCantor Market Data. The 3.75 percent security due in November 2018 gained 3/32, or 94 cents per $1,000 face amount, to 100 5/32. The two-year note yield increased 1 basis point to 1.18 percent.
The size of the Treasury's bond sale today matches the last 30-year auction in August as the biggest since 2006.
Two-Year Yields
Traders yesterday pushed two-year note yields to the lowest level since 2003, while the Treasury's $25 billion sale of three-year notes on Nov. 10 attracted the highest level of investor bids relative to the amount offered since 1998. Short- term debt is more sensitive to expectations about the Fed's monetary policy than longer-term maturities.
Initial claims for U.S. jobless insurance rose last week to the highest level since September 2001, when the economy was last in a recession. They increased by 32,000 to a larger-than- forecast 516,000 in the week ended Nov. 8, from a revised 484,000 the prior week, the Labor Department said today in Washington.
Futures on the Chicago Board of Trade show an 84 percent chance the Fed will lower its 1 percent target rate for overnight bank lending by a half-percentage point at its Dec. 16 meeting. The odds were 58 percent a week ago.
To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Sandra Hernandez in New York at shernandez4@bloomberg.net.
