BLBG:Treasuries Fall Third Day as Spain Keeps Investment-Grade
Treasuries fell for a third day,the longest losing streak since Sept. 6, as Spain kept its investment-grade debt rating from Moody’s Investors Service, curbing demand for the safest assets.
Benchmark 10-year yields climbed to the highest in three weeks after two German lawmakers said the country is open to aid for Spain before a summit of European Union leaders starting tomorrow. Economists say U.S. data today will show housing starts improved in September. U.S. government debt has handed investors a 0.4 percent loss this month, according to Bank of America Merrill Lynch indexes.
“We will continue to be in the risk-on trajectory and that is not very supportive for Treasuries,” said Michael Markovic, a senior fixed-income strategist at Credit Suisse Group AG in Zurich. “We expect the long-maturity end to finally break over the 3 percent level and stay there for a longer period,” he said, referring to 30-year yields.
The benchmark 10-year yield climbed four basis points, or 0.04 percentage point, to 1.76 percent at 7:20 a.m. New York time, the highest level since Sept. 21, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 dropped 11/32, or $3.44 per $1,000 face amount, to 98 26/32.
The 30-year yield increased four basis points to 2.96 percent. It has been below 3 percent since Sept. 19.
Losing Streak
Treasuries headed for their longest losing streak in six weeks after Moody’s kept Spain’s rating at investment grade, citing a reduction in the risk of the country losing market access because of the European Central Bank’s willingness to buy its debt. Moody’s assigned a negative outlook on Spain’s Baa3 sovereign debt, one step above junk, the New York-based company said in a statement yesterday.
Spanish government bonds rose, pushing 10-year borrowing costs to the lowest since April.
Treasuries dropped yesterday after Germany signaled it may be open to a bailout for Spain as Prime Minister Mariano Rajoy sought ways to pay the nation’s debt and cut the budget deficit.
U.S. government securities also fell this week as reports showed gains in retail sales and industrial production. Consumer prices climbed 2 percent in September from a year earlier, the most in five months, the Labor Department said yesterday.
Housing starts rose to an annual rate of 770,000 in September, the highest level in almost four years, based on the median forecast in a Bloomberg News survey of 80 economists before the Commerce Department reports the figure at 8:30 a.m. New York time.
Inflation Outlook
The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, widened one basis point to 2.47 percentage points. The average over the past decade is 2.17 percentage points.
Investors seeking safety snapped up bonds earlier in October, according to a report yesterday by EPFR Global, a fund- tracking company in Cambridge, Massachusetts.
Debt funds attracted $8.22 billion in the seven days ended Oct. 10, the second-biggest weekly inflow this year, according to the report, which EPFR distributed by e-mail.
Nouriel Roubini, the New York University professor who predicted the 2008 financial crisis, and Jim Rogers, the investor and author of the book “Hot Commodities,” both issued warnings on economic growth.
‘Still Worried’
U.S. gross domestic product will expand 1.5 percent next year, Roubini said in an interview from Singapore on Bloomberg Television’s “First Up” with Susan Li. A Bloomberg survey of economists projects the pace of expansion will be 2.1 percent this year and 2 percent in 2013.
“I’m still worried about the United States,” he said. “Job creation is still mediocre.”
The global economy may struggle in 2013 and 2014, largely because nations are finding it difficult to pay their debts, Rogers said.
“I’m very pessimistic,” he said yesterday on the “Bloomberg on the Economy” radio program with Michael McKee in New York.
The Federal Reserve is swapping short-term Treasuries in its holdings for longer maturities to put downward pressure on borrowing costs, part of its efforts to support the economy.
The central bank plans to sell as much as $8 billion of Treasuries due from March 2015 to May 2015 today as part of the plan, according to the Fed Bank of New York’s website.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
