Treasuries fell, headed for the first loss in a week, as U.S. equity-index futures gained after Cisco Systems Inc. reported quarterly profit that exceeded analysts’ estimates.
Benchmark 10-year yields climbed from a two-month low after Treasury Secretary Timothy F. Geithner said yesterday that it was “deeply implausible” that Republicans, who control the U.S. House, would force the U.S. over the fiscal cliff. Rebuilding after superstorm Sandy is spurring speculation the increase in construction in the coming months will support the economy.
“The U.S. economy will get better,” said Allen Lei, a Treasuries trader in Taipei at Hontai Life Insurance Co., which has $6 billion in fixed-income assets. “Treasury yields will go up.”
U.S. 10-year yields increased two basis points, or 0.02 percentage point, to 1.61 percent as of 7:04 a.m. in London, Bloomberg Bond Trader data show. The 1.625 percent security due in November 2022 declined 5/32, or $1.56 per $1,000 face amount, to 100 1/8. The rate slid to 1.57 percent yesterday, the lowest level since Sept. 5.
Lei said he set positions last week that will benefit if Treasury futures contracts fall.
Standard & Poor’s 500 Index futures advanced 0.4 percent, set for the biggest gain since Nov. 6.
Cisco Surprises
Cisco (CSCO), the biggest maker of computer networking equipment, said profit excluding some costs was 48 cents a share in the first fiscal quarter, which ended Oct. 27, in a statement yesterday. That compares with analysts’ average estimate for 46 cents a share, according to data compiled by Bloomberg.
The fiscal cliff refers to a standoff between the president and Congress about how to curb soaring U.S. debt through a mix of tax-code changes and reduction in federal spending. Without legislation, a combined $607 billion in tax increases and spending cuts will begin in January.
Kei Katayama, who buys U.S. government debt in Tokyo for Daiwa SB Investments Ltd., said he’s betting officials will avoid the fiscal cliff.
“It may take a little bit of time, but there will be some kind of compromise, and yields will go up,” said Katayama, who helps manage the equivalent of $62.5 billion at the unit of Japan’s second-biggest brokerage.
Ten-year rates will increase to 2.04 percent by June 30, according to a Bloomberg survey of banks and securities companies, with the most recent projections given the heaviest weightings.
U.S. retail sales probably fell 0.2 percent in October from the month before, following a 1.1 percent gain in September, according to the median forecast of 83 economists surveyed by Bloomberg News. A separate report today may show prices paid by producers grew more slowly in October.
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
