BLBG:Treasuries Rise on Speculation Existing Home Sales Fell
Treasuries rose for the first time in five days before an industry report that economists said will show sales of existing homes fell in September, highlighting an uneven rebound in the U.S. housing market.
Benchmark 10-year yields have climbed 15 basis points this week, the most in a month. Yields jumped on Oct. 17 when a government report showed housing starts surged. The Federal Reserve will sell as much as $1.1 billion of Treasury Inflation Protected Securities today as part of a plan to boost low growth. European leaders meeting in Brussels committed to a goal of creating a euro-area bank supervisor by the end of 2012, opening the prospect of direct aid to Spain’s banking sector.
“The economic backdrop is still quite weak and we are yet to see a sustainable improvement in economic indicators,” said Brian Barry, a fixed-income analyst at Investec Plc (INVP) in London. “It would be a surprise if Treasury yields keep rising as they have this week. You wouldn’t expect such a large increase in yields given the negatives on the horizon as Treasuries are still a safe-haven asset.”
The benchmark 10-year yield declined three basis points, or 0.03 percentage point, to 1.81 percent at 10:21 a.m. London time, according to Bloomberg Bond Trader prices. The 1.625 percent note maturing in August 2022 climbed 7/32, or $2.19 per $1,000 face amount, 98 11/32.
The yield rose to 1.83 percent yesterday, the highest level in a month. The rate rose through its 200-day moving average on Oct. 17, and it has held above the key level since then, based on closing prices.
Home Sales
U.S. existing home sales dropped 1.7 percent in September from the previous month, according to the median forecast of 78 economists surveyed by Bloomberg News before the National Association of Realtors reports the figure at 10 a.m. in New York. They rose 7.8 percent in August. Housing starts climbed 15 percent in September from August to a four-year high, government data showed Oct. 17.
The Fed is swapping short-term Treasuries in its holdings for longer-term securities to put downward pressure on borrowing costs, part of its efforts to spur the economy. The central bank plans to sell TIPS due from April 2014 to January 2016 today, according to the Fed Bank of New York’s website.
European leaders committed to their goal of creating a euro-area bank supervisor by year-end, according to officials at a European Union summit in Brussels. In China, the government won’t provide big economic stimulus and a strong rebound in growth is unlikely, Song Guoqing, an adviser to the People’s Bank of China, said yesterday.
Safe Haven
Ten-year Treasury yields may fall to 1 percent, said Gary Shilling, president of A. Gary Shilling & Co., an economic forecasting company in Springfield, New Jersey. Thirty-year rates, now 3 percent, may drop to 2 percent, he said yesterday on Bloomberg Television’s “Street Smart” with Trish Regan and Adam Johnson.
“We are setting ourselves up for a global recession,” he said. “Treasuries are the safe haven, one of the few in the world. More and more people are beginning to worry about deflation,” or a general drop in prices.
Bidders in a $7 billion sale of 30-year inflation-indexed securities yesterday accepted a record-low yield of 0.479 percent for securities that guard against the threat of rising consumer prices.
The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was little changed today at 2.52 percentage points. The average over the past decade is 2.17 percentage points.
U.S. government securities maturing in 10 years or more have handed investors a 5.3 percent loss in the past three months, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
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
