Treasuries rose, with long-term notes and bonds holding their place as the world’s best- performing government securities, after European finance ministers failed to agree on a Greek debt-reduction package.
U.S. government securities due in 10 years and longer returned 2.2 percent in the past month, the most among securities in 144 indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies. The gains include interest payments and the effects of currency changes against the dollar. Euro-area finance ministers plan another meeting next week after more than 11 hours of inconclusive talks, boosting demand for the relative safety of U.S. debt.
“There’s another postponement of the Greek bailout, and Treasuries will benefit,” said Will Tseng, who invests in U.S. bonds at Taipei-based Shin Kong Life Insurance Co., which has the equivalent of $55.5 billion in assets. “There’s less confidence that Greece will receive the money. Asian investors are already buying, and European and U.S. investors might make the same decision.”
Ten-year yields declined one basis point, or 0.01 percentage point, to 1.66 percent at 8:06 a.m. London time, according to Bloomberg Bond Trader prices. The price of the 1.625 percent security due November 2022 advanced 2/32, or 63 cents per $1,000 face amount, to 99 21/32.
Euro Falls
The euro tumbled 0.4 percent against the dollar to $1.2760 as the Greek debt talks failed to result in a decision.
U.S. government securities fell yesterday as Federal Reserve Chairman Ben S. Bernanke said an agreement to reduce long-term U.S. deficits may remove an impediment to economic growth and crimp haven demand.
“Yields are going to go up by the end of this year,” said Youngsung Kim, the head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor with the equivalent of $104.4 billion in assets. “The U.S. economy is recovering with a moderate growth rate. I’m confident President Obama will solve the fiscal cliff problem.”
U.S. 10-year rates may climb to 1.8 percent or 1.9 percent by Dec. 31, levels that may lead Samsung Asset to buy, Kim said.
A Bloomberg survey of banks and securities companies projects the rate will rise to 1.74 percent at year-end and to 1.97 percent by June 30, with the most recent projections given the heaviest weightings.
Fiscal Cliff
The fiscal cliff refers to $607 billion of tax increases and spending cuts that will automatically come into force at the beginning of 2013 unless lawmakers act. President Barack Obama wants to impose higher taxes on the wealthy and reduce spending while Republican lawmakers oppose raising taxes.
The Thomson Reuters/University of Michigan consumer sentiment index rose to 84.5 in November from 82.6 in October, according to a Bloomberg News survey of economists before the report at 9:55 a.m. New York time today.
The figure will be the final reading for November. The group issued a preliminary number of 84.9 earlier this month. The index hasn’t been higher than 84 since July 2007. Separate reports today will probably show growth in an index of leading economic indicators slowed and initial claims for jobless insurance declined, based on the Bloomberg surveys.
U.S. Holiday
The Securities Industry and Financial Markets Association recommended a full market close tomorrow for the Thanksgiving holiday in the U.S. and an early close at 2 p.m. New York time on Nov. 23.
Bank of America Merrill Lynch’s MOVE index, which measures price swings in Treasuries based on options, fell to 53.7 yesterday, the least since 2007.
The U.S. is scheduled to sell $13 billion of 10-year Treasury Inflation Protected Securities today. It also plans to announce the sizes of 2-, 5- and 7-year notes being auctioned next week.
Ten-year TIPS yielded negative 0.79 percent. The rate slid to a record negative 0.96 percent last month, with investors so concerned about inflation that they are willing to accept yields below zero to buy debt that protects against price gains.
The securities are also an alternative when money managers expect limited gains from conventional debt. The principal on an inflation-protected note is adjusted according to changes in the consumer price index. With inflation, the capital amount increases. At maturity, the investor receives either the adjusted or original principal, whichever is greater.
U.S. consumer prices rose 2.2 percent in October from the year before, versus the 10-year average of 2.5 percent, based on the latest figures from the Labor Department.
The last 10-year TIPS sale in September drew bids for 2.36 times the amount of debt offered, the lowest amount since 2009.
The U.S. will probably sell $35 billion of 2-year debt on Nov. 27, the same amount of 5-year notes the next day and $29 billion of 7-year securities on Nov. 29, according to Wrightson ICAP LLC, an economic advisory company based in Jersey City, New Jersey.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
