BLBG:Treasury 10-Year Yields Below 2% Before Fed Starts 2-Day Meeting
Treasury 10-year yields were below 2 percent for a third day before the Federal Reserve starts a two-day meeting today amid bets policy makers will decide to keep buying bonds to support economic growth.
Benchmark 10-year notes held a three-day gain 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 “premature” interest- rate increases would stifle the U.S. economy. The central bank is scheduled to buy as much as $3.5 billion of Treasuries today as part of its quantitative-easing program to spur growth through capping borrowing costs.
“Bernanke is leading the charge and continues to water down any hawkish talk,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “Last week’s close under 2 percent brought in more buying of Treasuries. U.S. data has been uniformly strong but the risk looking forward is that it takes a downturn. If that’s the case, yields could dip towards 1.80 percent.”
The 10-year yield was little changed at 1.94 percent at 9:56 a.m. in London after dropping eight basis points in the previous two days, according to Bloomberg Bond Trader prices. The 2 percent note due February 2023 was at 100 17/32.
The Fed will issue a statement and economic projections after concluding its two-day policy meeting tomorrow, and Bernanke will brief reporters.
“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 in San Francisco on March 1.
Cyprus Concern
Euro-area finance chiefs kept the pressure on Cyprus following a teleconference yesterday, saying the nation should press ahead with raising 5.8 billion euros ($7.5 billion) from bank depositors to unlock emergency loans.
“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.
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.
The central bank will purchase Treasuries maturing from May 2020 to February 2023, according to the website of the Fed Bank of New York.
U.S. housing starts rose to a 915,000 pace in February from 890,000 the previous month, according to a Bloomberg News survey before today’s report. Separate data on March 21 will show purchases of existing homes increased to a 5 million annual rate, the most since November 2009.
“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.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
