BLBG:Treasuries Fall for Second Day as Asian Stocks Gain; Fink Bearish on Bonds
Treasuries fell for a second day, the first back-to-back loss in two weeks, as gains in Asian stocks reduced investor appetite for debt before the U.S. sells 10-year notes today and 30-year bonds tomorrow.
Traders demanded an additional 1.74 percentage points to buy 10-year Treasuries instead of two-year securities, versus the average of 1.58 percentage points for the past decade. Investors should hold stocks instead of bonds, said Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager.
“Yields may rise at the auction” today, said Tsutomu Komiya, who helps oversee the equivalent of $102.6 billion as a bond investor in Tokyo at Daiwa Asset Management Co., a unit of Japan’s second-biggest brokerage. “The economy is picking up.”
Benchmark U.S. 10-year rates rose two basis points to 1.99 percent at 6:51 a.m. in London, according to Bloomberg Bond Trader prices. The 2 percent security due in November 2021 fell 5/32, or $1.56 per $1,000 face amount, to 100 2/32.
The MSCI Asia Pacific Index of shares rose 1.2 percent, set for the highest close since Aug. 4. The Dow Jones Industrial Average climbed to the most since May 2008 yesterday.
The 10-year notes scheduled for auction today yielded 2.03 percent in pre-auction trading, compared with the record low of 1.90 percent the last time the securities were sold on Jan. 11.
Investors bid for 3.29 times the amount of debt offered in January, versus the average of 3.11 for the past 10 auctions.
Japan’s 10-year bond yield increased two basis points to 0.99 percent, rising for a fourth day.
Auction Demand
A sale of three-year Treasuries yesterday drew a yield of 0.347 percent, compared with a forecast of 0.346 percent in a Bloomberg News survey of seven of the Fed’s 21 primary dealers, the companies that underwrite the U.S. debt.
The U.S. is scheduled to conclude this week’s auctions with a $16 billion 30-year sale tomorrow. The three offerings will raise $22.4 billion of new cash, with maturing securities totaling $49.6 billion.
Investors should hold stocks for their return relative to bonds and low valuations, BlackRock’s Fink said.
“You need to take on more risk” Fink said on Bloomberg Television’s “First Up” with Susan Li in Hong Kong. Treasuries will have minimal returns with the Federal Reserve keeping interest rates low, he said. BlackRock, based in New York, oversees $3.51 trillion.
U.S. central bankers announced Jan. 25 that they will hold their target for overnight bank lending near zero until at least late 2014. Federal Reserve Chairman Ben S. Bernanke said policy makers are considering buying bonds to sustain the expansion.
The Fed is in the process of replacing $400 billion of shorter-maturity Treasuries in its holdings with longer-term debt to cap borrowing costs and spur the economy under a program it plans to conclude in June.
The central bank is scheduled to buy as much as $2 billion of securities due from February 2036 to November 2041 today as part of the plan, according to the New York Fed’s website. It also plans to sell as much as $8.75 billion of Treasuries maturing from June 2013 to November 2013, the site shows.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
