BLBG: Treasury 10-Year Notes Drop as Pending Home Resales Increase
By Susanne Walker
Sept. 2 (Bloomberg) -- Treasury 10-year notes fell for a second day as pending home resales unexpectedly rose in July and initial jobless claims dropped last week, reducing demand for the safety of government debt.
Ten-year note yields rose before the U.S. sells $10 billion in Treasury Inflation Protected Securities of that maturity today and announces how much it plans to raise in auctions of 3-, 10- and 30-year debt next week.
“ Too many people were long on the market,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., one of the 18 primary dealers obligated to participate in U.S. auctions. “They are getting a little bit flatter for the employment number tomorrow.” A long is a bet the price of a security will gain.
The benchmark 10-year note yield rose 5 basis points, or 0.05 percentage point, to 2.63 percent at 10:05 a.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in August 2020 fell 14/32, or $4.38 per $1,000 face amount, to 99 31/32. Two-year note yields gained less than 1 basis point to 0.51 percent, compared with the all- time low of 0.4542 percent set on Aug. 24.
An index of pending U.S. home resales increased 5.2 percent in July from the prior month, the National Association of Realtors reported. The median forecast of 37 economists in a Bloomberg News survey was for a drop of 1 percent.
U.S. Jobless Claims
The number of first-time unemployment claims in the U.S. decreased to 472,000 in the week ended Aug. 28, from a revised 478,000, the Labor Department reported. The median forecast of 40 economists in a Bloomberg News survey was for an advance to 475,000 from a previously reported 473,000.
U.S. employers eliminated 100,000 positions in August after cutting 131,000 jobs in the prior month, according to the median forecast of 78 economists. The Labor Department’s payrolls report is due tomorrow.
Treasuries fell yesterday after a gauge of U.S. manufacturing unexpectedly increased in August. The Institute for Supply Management’s index rose last month to 56.3 from 55.5 in the previous month, the Tempe, Arizona-based group reported. Readings greater than 50 signal growth.
Volatility in the Treasury market reached a three-month high this week. Bank of America Merrill Lynch’s MOVE index, measuring price swings based on over-the-counter options maturing in 2 to 30 years, climbed yesterday to 110.10, the highest level since June 1.
U.S. Debt Auctions
The Treasury will sell $67 billion of 3-, 10- and 30-year securities next week, the smallest combination of the maturities since July 2009, according to a Bloomberg News survey of 10 primary dealers.
The monthly auctions will be made up of $33 billion in 3- year notes, $21 billion in 10-year debt and $13 billion in 30- year bonds, according to the median forecasts in the survey. That’s down from $74 billion in August and a record-tying $81 billion in February. The Treasury will announce the amounts at 11 a.m. New York time.
Treasuries dropped earlier as the European Union’s statistics office reported that the 16-nation euro region’s gross domestic product rose a revised 1.9 percent in the second quarter from last year. The office had previously reported a gain of 1.7 percent. Exports surged the most on record.
European Central Bank President Jean-Claude Trichet said the ECB will keep offering banks unlimited liquidity into next year. The ECB left its main refinancing rate at 1 percent.
To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net
