BLBG:Treasuries Hold Gain as Consumer Prices May Hold In Check
Treasury 10-year notes held gains as economists said a government report this week will show consumer prices were in check in December.
U.S. inflation-protected securities, which have outperformed conventional government debt every year since the financial crisis of 2008, are losing their appeal as costs remain contained. Treasury Inflation Protected Securities handed investors a 1.6 percent loss in the past month, versus a 0.9 percent decline for bonds that don’t offer inflation protection, according to Bank of America Merrill Lynch indexes.
“Consumer prices are under pressure,” said Hans Goetti, the Singapore-based chief investment officer for Asia at Finaport Investment Intelligence, which manages the equivalent of $1.5 billion. “Unemployment is still high. We’re going to revisit the lows in yields” for nominal bonds, he said. Finaport favors the securities over TIPS, Goetti said.
Benchmark 10-year yields were little changed at 1.87 percent as of 7:20 a.m. in London, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 was 97 26/32.
Yields dropped three basis points, or 0.03 percentage point, last week. The record low was 1.38 percent set in July.
U.S. consumer prices were probably unchanged in December from the month before, after falling in November, according to a Bloomberg News survey of economists before the U.S. reports the figure Jan. 16.
Inflation Expectations
The difference between yields on 10-year notes and same- maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt, was 2.52 percentage points. The average over the past decade was 2.19 percentage points.
Fed Chairman Ben S. Bernanke is scheduled to speak at 4 p.m. today in Ann Arbor, Michigan.
The Fed is purchasing $85 billion of government and mortgage debt a month to spur the economy by putting downward pressure on interest rates. The central bank plans to buy as much as $1.75 billion of Treasuries maturing from February 2036 to November 2042 today, according to the website of the Fed Bank of New York.
U.S. data tomorrow may show retail sales rose and producer prices fell in December, separate Bloomberg surveys of economists show.
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
