BLBG:Treasuries Decline on U.S. Payroll Tax Agreement, Before Spending Report
The yield on 10-year Treasuries headed toward the biggest weekly advance in two months as House Speaker John Boehner agreed on a plan to extend a U.S. payroll- tax cut past its Dec. 31 expiration.
The benchmark note yield approached a more than one-week high amid signs economic growth in the world’s largest economy is being sustained. Consumer spending probably climbed in November, giving the U.S. economy a boost heading into 2012, economists forecast before a Commerce Department report today. Japan was closed today for a public holiday.
“News flow was good, although we all know that 2012 is going to be bumpy anyway, but people are starting to trim a little their positioning” in Treasuries, said Alessandro Mercuri, an interest-rate strategist at Lloyds Bank Corporate Markets in London.
Yields on 10-year notes advanced two basis points, or 0.02 percentage point, to 1.97 percent at 7:12 a.m. New York time, according to Bloomberg Bond Trader prices. The 2 percent securities maturing in November 2021 fell 6/32, or $1.88 per $1,000 face amount, to 100 8/32.
The yield headed for a 12 basis-point weekly gain, the biggest advance since the five days ended Oct. 14.
The agreement on extending the tax cut capped a month of wrangling that led to a revolt by House Republicans over a two- month bipartisan deal reached in the Senate and passed Dec. 17 in an 89-10 vote. The House and the Senate will approve the deal by unanimous consent before Dec. 25, according to a statement issued by Boehner.
‘The Right Thing’
Boehner said at a news conference in Washington yesterday his members decided to “do the right thing for the American people even if it’s not exactly what we want.”
Commerce Department figures due today are forecast to show consumer purchases rose 0.3 percent after increasing 0.1 percent in October, according to the median estimate of economists surveyed by Bloomberg News. The report may also show incomes grew 0.2 percent, down from a 0.4 percent gain the prior month.
Confidence among U.S. consumers rose to a six-month high in December, according to a Thomson Reuters/University of Michigan index published yesterday. A separate index of U.S. leading indicators climbed more than forecast in November, a sign the economy will keep growing in early 2012.
“The U.S. economy is showing signs of being one of those economies that will lead us out of this slow global growth environment,” said Grant Hassell, head of fixed income at AMP Capital Investors in Wellington, New Zealand. “The bigger picture is one of rising U.S. long-end yields.”
2011 Returns
The 10-year rate may rise to 2.5 percent by the second quarter of next year, Hassell said. The yield will climb to 2.32 percent, according to the Bloomberg average forecast from banks and securities companies with the most recent forecasts given the heaviest weightings.
This week’s gain in 10-year yields pared the year’s decline to 133 basis points. The securities have returned 16 percent in 2011, more than the 9.3 percent gain in the broader Treasury market, according to Bank of America Merrill Lynch indexes.
Pacific Investment Management Co., operator of the world’s biggest bond fund, said the U.S. economy may stagnate next year.
Gross domestic product may expand zero percent to 1 percent, weighed down by Europe’s crisis and a slowdown in China, Pimco said in an economic outlook posted on its website. Global growth will slow to between 1 percent to 1.5 percent, from 2.5 percent in 2011, the Newport Beach, California-based firm forecast.
The MSCI All Country World Index of equities returned a 7.1 percent loss over the same period, including reinvested dividends, according to data compiled by Bloomberg.
To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
