BLBG:Treasury 10-Year Yields Remain Below 2 Percent Before Fed Meets
Ten-year Treasury yields remained below 2 percent for a third session before the Federal Reserve starts a two-day meeting today amid bets policy makers will decide to keep buying bonds to support economic growth.
Yields maintained their decline from yesterday as Cyprus’s parliament prepares to vote on a proposed levy on bank deposits that has renewed concern about the region’s debt crisis. Fed Chairman Ben S. Bernanke said this month that “premature” rate gains would stifle the U.S. economy.
“We expect Bernanke to signal his intention to continue quantitative easing,” said Shinichiro Kadota, a strategist for non-yen debt in Tokyo at Barclays Plc, referring to the Fed’s bond-purchase program. “Yields are likely to stay low.”
The U.S. 10-year yield was little changed at 1.96 percent at 2:38 p.m. in Tokyo after sliding 7 1/2 basis points in the previous two sessions. It’s been at an average of 2.46 percent in the past three years. The 2 percent note due February 2023 traded at 100 13/32, according to Bloomberg Bond Trader prices.
The yield on Japan’s 10-year government bond added half a basis point to 0.59 percent. The 0.585 percent level reached yesterday matched the lowest since June 2003.
“Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading -- ironically enough -- to an even longer period of low long-term rates,” Bernanke said in a speech on March 1.
The Fed is scheduled to buy as much as $3.5 billion of Treasuries today maturing in May 2020 to February 2023 as part of its quantitative easing program. The central bank purchases $85 billion of Treasuries and mortgage debt each month to stimulate growth through lower borrowing costs.
Cyprus Concern
The central bank tomorrow will issue a statement and economic projections after concluding a two-day policy meeting, and Bernanke will brief reporters.
Euro-area finance ministers told Cyprus to raise 5.8 billion euros ($7.5 billion) from bank depositors to unlock emergency loans, suggesting that small-scale savers are spared.
“Cypriot authorities will introduce more progressivity in the one-off levy compared to what was agreed on March 16,” the ministers said in a statement following a teleconference late yesterday.
Cyprus is the fifth euro country to seek a bailout since 2010. The proposed levy sparked outrage in the island nation and concern among investors about setting a precedent by breaking the taboo against raiding bank accounts.
U.S. Data
In the U.S., government figures will probably show today that housing starts rose to a 915,000 pace in February from 890,000 the prior month, according to the median estimate of economists surveyed by Bloomberg News. Separate data on March 21 may show that purchases of existing homes increased to a 5 million annual rate, the most since November 2009.
The MSCI Asia Pacific Index (MXAP) of shares advanced 0.5 percent today, rebounding from a 1.9 percent drop yesterday that was the biggest since July.
“Risk-on sentiment is increasingly strong in financial markets,” said Hideki Shibata, a senior strategist for rates and currencies at Tokai Tokyo Research Center Co. in Tokyo. “U.S. economic indicators are resilient,” putting upward pressure on Treasury yields, he said.
Treasuries due in a decade or more traded last week at almost the cheapest levels in 1 1/2 years relative to global peers with comparable maturities, according to Bank of America Merrill Lynch indexes. Yields on the Treasuries climbed to 54 basis points higher than those in an index of other sovereign debt on March 14, the most since August 2011, the data showed.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
