BLBG:Treasuries Stay Lower Before Home Prices; BlackRock Is Be
Treasuries held a decline from yesterday as economists said an industry report today will show the decline in U.S. home prices slowed.
The U.S. plans to sell $35 billion of two-year debt today, the first of three note auctions this week. U.S. 10-year Treasuries headed for their biggest monthly drop in more than a year as the BlackRock Inc. (BLK), the world’s largest money manager with $3.51 trillion in assets, said investors should favor stocks over bonds.
“We’ve seen some stronger data in the last month and that has caused yields to rise,” said Marius Daheim, a senior fixed- income strategist at Bayerische Landesbank in Munich. “The market still seems ready to react to positive data surprises.”
Ten-year Treasury yields were little changed at 2.24 percent at 8:41 a.m. London time, according to Bloomberg Bond Trader prices. The price of the 2 percent security due in February 2022 traded at 97 27/32. The rate increased two basis points, or 0.02 percentage point, yesterday, and has increased 27 basis points in March.
Two-year yields were little changed at 0.34 percent, more than nine basis points more than the upper end of the Federal Reserve’s target range for its benchmark interest rate, versus an average of 41 basis points since the central bank set the band at zero to 0.25 percent in 2008.
Treasuries have handed investors a 1.4 percent loss in 2012, heading for their biggest quarterly decline since the last three months of 2010, according to indexes compiled by Bank of America Merrill Lynch.
Property Values
The S&P/Case-Shiller index of property values in 20 U.S. cities dropped 3.8 percent from January 2011, the smallest decline in three months, according to the median forecast of economists surveyed by Bloomberg News. Another report will show consumer confidence fell, a separate survey indicated.
“I clearly want to be overweight equities,” Robert Doll, chief equity strategist at BlackRock, said in a radio interview yesterday on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I want to be underweight Treasuries.
The U.S. is “probably the only major economy in the world that’s going to have stronger economic growth in 2012 than we had in 2011,” Doll said.
The Chicago Board Options Exchange Volatility Index, the so-called fear gauge for U.S. stocks, fell to 14.26 yesterday, the lowest closing level since 2007.
Bernanke Comments
Bonds fell yesterday as Fed Chairman Ben S. Bernanke said stimulative policy is still needed to reduce joblessness.
“Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” he said in a speech in Arlington, Virginia.
The Fed is scheduled to buy as much as $2.25 billion of Treasuries due from 2036 to 2042 today under a plan announced in September to cap borrowing costs by replacing $400 billion of shorter maturities in its holdings with longer-term debt.
The central bank reiterated on March 13 its pledge to keep borrowing costs low at least until late 2014.
U.S. joblessness has fallen to 8.3 percent, the lowest level in three years, according to the Labor Department. The Institute for Supply Management’s factory index shows 31 months of expansion.
Investors are questioning whether the gains can be sustained with Bush-era income-tax cuts scheduled to expire at the end of this year, while $1 trillion in automatic government spending reductions will start taking effect in January if Congress doesn’t intervene.
‘Not as Good’
“Market participants recognize that the current economic condition is not as good as they thought before,” said Hajime Nagata, an investor in Tokyo at Diam Co., which manages the equivalent of $128.8 billion and is an arm of Dai-Ichi Life Insurance Company Ltd., Japan’s second-biggest life insurer. The Fed would “like to keep the long-bond rates very low,” he said.
Nagata said he plans to buy as the 10-year yield approaches 2.4 percent, which was this year’s high set March 20.
The two-year notes being sold today yielded 0.36 percent in pre-auction trading, compared with 0.31 percent at the previous sale on Feb. 21.
Investors bid for 3.54 times the amount of available debt last month, versus the average of 3.53 for the past 10 auctions. Indirect bidders, the category of buyers that includes foreign central banks, purchased 35.8 percent, the most since November at the monthly sales.
The government is also scheduled to auction $35 billion of five-year notes tomorrow and $29 billion of seven-year securities on March 29.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
