Treasuries rose for a second day before a report this week that economists said will show the U.S. jobless rate climbed in October and as investors braced for Hurricane Sandy. The Securities Industry and Financial Markets Association recommended trading in dollar-denominated fixed-income securities end at noon in New York today because of the storm. Long-term bonds are outperforming shorter maturities and the trend has further to go, no matter who wins the Nov. 6 presidential election, Bank of America Corp. said. Treasuries were also underpinned amid renewed concern that Greece may need to restructure its debt. “The U.S. economy is just not going strong enough to dissuade the Federal Reserve from further stimulus,� said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “It’s that expectation and the situation in Europe that keep demand for Treasuries well underpinned. � The U.S. 10-year yield fell two basis points, or 0.02 percentage point, to 1.73 percent at 8:19 a.m. in London, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 rose 6/32, or $1.88 per $1,000 face amount, to 99 3/32. The unemployment rate climbed to 7.9 percent from a three- year low of 7.8 percent in September, a Bloomberg News survey of economists showed. A net 125,000 workers were added to payrolls, following an increase of 114,000 in September, the Labor Department’s employment report on Nov. 2 will also say, according to another Bloomberg survey. Record Unemployment Treasuries rose on Oct. 26, sending the 10-year yield down eight basis points, after a report showed Spain’s unemployment rate climbed to a record 25.02 percent, fueling demand for the relative safety of U.S. debt. The European Commission, the European Central Bank and the International Monetary Fund proposed a restructuring of Greek debt that would require public-sector lenders to take losses, Spiegel reported without saying there it got the information. The hurricane led some investors to buy Treasuries as a haven, said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender. Debt Sales Before the noon close in the U.S., the Treasury is scheduled to sell $32 billion of three-month bills and $28 billion of six-month bills at 11:30 a.m. New York time. The Fed is scheduled to sell $7 billion to $8 billion of Treasuries maturing from November 2015 through December 2015 at 11 a.m. The sales are part of the Fed’s program to replace short-term debt in its portfolio with longer-term Treasuries in an effort to keep borrowing costs low. The securities association will monitor conditions to determine any additional recommendations for tomorrow, it said in its statement. Gains may be limited before Commerce Department data at 8:30 a.m. today forecast to show household spending increased 0.6 percent in September, the biggest gain in seven months, based on responses from economists. From Treasuries to mortgage securities to corporate bonds, returns on U.S. fixed-income assets have averaged 6.5 percent throughout President Barack Obama’s term, exceeding the 4.6 percent during the previous four years under George W. Bush, according to Bank of America Merrill Lynch indexes. Yields on America’s fixed-income assets are seven basis points less than the global average, compared with 51 basis points more back then, the data shows. Treasury Rally The rally in Treasuries is almost over, and 10-year yields will rise to 2 percent by year-end, said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc. “I’m not recommending my customers buy Treasuries,� Shimazu said. “Equities and commodities are much better investments. The economy isn’t great, but it continues to recover.� Treasuries gained 1.7 percent in 2012 through last week, the Bank of America figures show. The MSCI All-Country World Index (MXWD) returned 13 percent, according to data compiled by Bloomberg. The S&P GSCI Index of commodities is little changed. A victory by Obama in next month’s vote with neither party controlling both houses of Congress may increase concern that the so-called fiscal cliff will slow growth, Priya Misra, Shyam Rajan, Bank of America strategists in New York, wrote in the report Oct. 26. The fiscal cliff refers to $607 billion in federal spending cuts and tax increases scheduled to take effect in January unless the U.S. Congress acts. Longer Maturities This outcome will lead investors to favor longer maturities because it threatens the economy, according to Bank of America, one of the 21 primary dealers that trade directly with the Fed. A victory by challenger Mitt Romney may lead to questions about a change in central bank leadership and policy. This should push yields higher, led by mid-term rates, according to the report. Yields on the shortest maturities are anchored by the Fed’s view that it will need to keep its target for overnight bank lending close to zero at least through the middle of 2015. Romney has said he won’t reappoint Fed Chairman Ben S. Bernanke, who has tried to put downward pressure on yields by buying Treasury and mortgage debt. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

Source