BLBG:Treasuries Snap Gain as Euro-Area Leaders Reach Agreement at Crisis Summit
Treasuries halted an advance for this week as investors assessed the European Union’s latest effort to tackle the region’s debt crisis.
U.S. government securities snapped a two-day gain after German Chancellor Angela Merkel said the leaders of the 17 euro nations reached an accord to tighten budget controls. Officials added 200 billion euros ($267 billion) to their crisis-fighting war chest and sought to get the European Central Bank to step up its rescue operations.
U.S. 10-year yields rose one basis point, or 0.01 percentage point, to 1.98 percent as of 6:43 a.m. in London, according to Bloomberg Bond Trader prices. The 2 percent security maturing in November 2021 fell 1/32, or 31 cents per $1,000 face amount, to 100 7/32. The rate, which has declined five basis points this week, set a record low of 1.67 percent on Sept. 23.
“The current level is overvalued,” said Sungjin Park, who heads the $67.8 billion debt division at Samsung Asset Management Co. in Seoul, South Korea’s largest private bond investor. “As time goes by, they will agree to the fiscal and monetary plans” in Europe, he said.
In an accord hailed by ECB President Mario Draghi, the region’s leaders laid out a new fiscal pact to prevent future debt runups and accelerated the startup of the planned 500 billion-euro rescue fund.
Ten-year yields will advance to 2.42 percent by the middle of 2012, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings.
Most Since 2008
Demand for the relative safety of U.S. government debt has driven Treasuries to a 9.3 percent gain in 2011 as of yesterday, the most since 2008, according to Bank of America Merrill Lynch figures. German bunds returned 8.2 percent and Japanese bonds advanced 1.8 percent.
The threat of slowing economic growth will maintain demand for U.S. securities, said Hans Goetti, the Singapore-based chief investment officer for Asia at Finaport Investment Intelligence, which oversees the equivalent of $1.5 billion in global assets.
“The U.S. economy has strengthened a bit lately but it’s still is not where it should be,” he said. “Bonds still make a lot of sense.” Ten-year yields may fall to less than 1.5 percent next year, Goetti said.
China, Japan Economies
China’s industrial output increased 12.4 percent in November, the slowest pace since August 2009, the statistics bureau said on its website. Japan’s gross domestic product increased at an annualized 5.6 percent in the three months ended Sept. 30, the Cabinet Office said in Tokyo today, compared with a preliminary figure of 6 percent.
A U.S. industry report today will show U.S. consumer confidence rose this month to the highest since June, economists said. The Thomson Reuters/University of Michigan index of consumer sentiment probably climbed to 65.8 in December from 64.1 in November, a Bloomberg News survey of economists showed.
The Federal Reserve is replacing $400 billion of shorter- maturity Treasuries in its holdings with longer-term debt to keep rates down and foster growth, in a plan it announced in September.
The Fed is scheduled to buy as much as $2.75 billion of securities due from 2036 to 2041 today as part of the program, according to the New York Fed’s website.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; wgoodman@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
