BLBG:Treasuries Decline Before Confidence Data; Head for Weekly Gain on Europe
Treasuries fell for the first time in three days before a report that economists said will show consumer confidence rose to the highest level since June, adding to evidence the economic recovery is gathering momentum.
The declines pared a weekly gain by notes. European leaders agreed to tighten budget rules and boost their crisis-fighting arsenal by 200 billion euros ($267 billion) in their latest bid to stem the region’s sovereign debt crisis. Treasuries also fell as the U.S. prepares to sell $78 billion of debt next week.
“If we are going to see positive data surprises in the U.S., then we could get some paring of the gains in Treasuries,” said Niels From, chief analyst at Nordea Bank AB in Copenhagen. “This is going to be a long process of solving fundamental issues in the euro zone.”
The benchmark 10-year yield climbed four basis points, or 0.04 percentage point, to 2.01 percent at 10:49 a.m. London time, according to Bloomberg Bond Trader prices. The 2 percent note due in November 2021 fell 12/32, or $3.75 per $1,000 face amount, to 99 28/32. The yield declined about three basis points this week. The 30-year yield also increased four basis points, to 3.04 percent, leaving it little changed in the week.
The Thomson Reuters/University of Michigan index of consumer sentiment rose to 65.8 in December from 64.1 the prior month, according to a Bloomberg News survey before today’s report. Fewer Americans filed applications for jobless benefits last week, the Labor Department said yesterday.
Debt Sales
Ten-year yields in the U.S. will climb to 2.42 percent by the middle of next year, according to a Bloomberg survey of analysts, with the most recent forecasts given the heaviest weightings.
The U.S. will auction $32 billion of three-year notes on Dec. 12, $21 billion of 10-year debt the next day and $13 billion in 30-year bonds on Dec. 14, the Treasury said yesterday. The government will also sell $12 billion of five- year Treasury Inflation Protected Securities on Dec. 15.
The Federal Reserve is replacing $400 billion of shorter- maturity Treasuries in its holdings with longer-term debt to cap borrowing costs, in a plan it announced in September. It 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.
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.
‘Bonds Make Sense’
“The U.S. economy has strengthened a bit lately but it’s still 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.
Europe’s leaders agreed at their summit in Brussels to accelerate the start of a planned 500 billion-euro rescue fund and watered down bondholder loss-sharing provisions.
They said the permanent rescue fund known as the European Stability Mechanism won’t get a banking license that would enable it to boost its firepower. European Central Bank President Mario Draghi hailed the accord.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
