BLBG:Treasury Yields Are 20 Basis Points From Low Before CPI
Treasury yields were 20 basis points from the record low before a U.S. report economists said will show the cost of living increased in October at the slowest pace in three months as inflation held in check.
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, narrowed to 2.35 percentage points, the least in two months. Minutes of the Federal Reserve’s last meeting showed policy makers think the central bank may need to boost bond purchases next year to support the economic recovery. Fed Chairman Ben S. Bernanke is scheduled to speak today.
“Yields will go down to new lows,” said Hideo Shimomura, who helps oversee the equivalent of $74.8 billion in Tokyo as chief fund investor at Mitsubishi UFJ Asset Management Co., part of Japan’s largest publicly-traded bank. “The economy is recovering, but it’s only moderate growth.”
U.S. 10-year notes yielded 1.58 percent as of 2:38 p.m. in Tokyo, Bloomberg Bond Trader data show. The 1.625 percent security due in November 2022 changed hands at 100 3/8. The all- time low rate was 1.38 percent set on July 25.
Ten-year yields will drop to 1.1 percent in the first quarter of next year, Shimomura said. A Bloomberg survey of banks and securities companies projects the yield will climb to 1.74 percent by Dec. 31 and to 1.86 percent by March 31, with the most recent projections given the heaviest weightings.
Japan’s 2022 bond rate declined 2 basis points to 0.73 percent. It has been in a range of 0.73 percent to 0.795 percent for the past month. A basis point is 0.01 percentage point.
$85 Billion
Fed Bank of San Francisco President John Williams said yesterday the U.S. central bank will probably buy about $85 billion in bonds per month starting in early 2013 and continue purchasing securities well into the second half of the year to support the economy.
Shinzo Abe, leader of Japan’s opposition Liberal Democratic Party, said today the nation’s central bank should adopt unlimited easing. Polls show the ruling Democratic Party of Japan will lose a general election set to be held next month.
The U.S. consumer price index probably rose 0.1 percent in October from the month before, based on the median estimate of economists surveyed by Bloomberg News before the Labor Department report at 8:30 a.m. New York time. The pace of growth would mark a slowing after 0.6 percent gain in August and September.
U.S. Inflation
Prices advanced 2.1 percent in October from the year before, the Bloomberg survey showed. Inflation, as measured by this gauge, has averaged 2.5 percent over the past decade, after rising to as high as 14.8 percent in 1980.
Other reports today may show initial jobless claims climbed in the wake of superstorm Sandy in the Northeast, while regional manufacturing decelerated.
The Fed’s preferred measure of inflation expectations, the five-year, five-year forward break-even rate, fell to 2.76 percent as of Nov. 9, the most recent reading available according to data compiled by Bloomberg. It was the lowest level in three weeks.
In minutes released yesterday, some Fed officials said the central bank may need to expand its monthly purchases of bonds next year after the December expiration of a program known as Operation Twist, which involves selling short-term debt and buying longer maturities.
“A number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity-extension program,” according to the record of the Federal Open Market Committee’s Oct. 23-24 gathering.
The so-called fiscal cliff of tax increases and spending cuts combined with Europe’s debt crisis have increased demand for the relative safety of Treasuries, helping push yields down.
Bernanke is scheduled to speak on housing and the mortgage market at 1:20 p.m. in Atlanta.
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
