BLBG:Treasuries Fall in Weekly Loss as Stocks Rise; JGBs Drop
Treasuries fell, with 10-year note yields climbing to the highest level in five weeks, as stock gains and signs the U.S. economy is improving sapped demand for fixed-income securities.
Benchmark yields were set for their biggest weekly increase in two months before Federal Reserve Chairman Ben S. Bernanke speaks today at a banking conference in Chicago. Government bonds in Japan, Germany and the U.K. slumped and the yen weakened beyond 100 per dollar for the first time in four years. The Fed and other central banks are pumping cash into their economies or cutting interest rates, prompting money managers to seek higher-yielding assets.
“The time is right for some of these safe-haven markets to see some unwinding,” said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London. “There was a huge move in Japanese government bonds and also in stocks and the dollar-yen. Yields are going to push higher in coming months as there isn’t that sense of urgency that pushed them toward record lows.”
The U.S. 10-year yield climbed four basis points, or 0.04 percentage point, to 1.86 percent at 10:27 a.m. in London, after touching 1.87 percent, the highest since April 3, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2023 fell 13/32, or $4.06 per $1,000 face amount, to 99 1/32. The yield has climbed 12 basis points this week, the most since the period ended March 8.
The 10-year rate will rise to 2.25 percent by year-end, Wraith said, citing Merrill Lynch’s official forecast. That compares with a median estimate of 2.20 percent in a Bloomberg survey of 71 economists between May 3 to May 8.
Monthly Loss
Treasuries slid 0.5 percent this month through yesterday, Bank of America Merrill Lynch data show. The Standard & Poor’s 500 Index (SPX) of U.S. shares returned 1.9 percent in the same period and climbed to a record yesterday, though dropping by the end of the session. European stocks gained for a fourth day, with the Stoxx Europe 600 Index reaching its highest level since June 2008.
Japan’s 10-year yield climbed as much as 11 basis points to 0.7 percent, the highest level since Feb. 25. The yield on 10-year German bunds increased six basis points to 1.33 percent, while the rate on similar-maturity U.K. gilts also climbed six basis points, to 1.85 percent.
The yen depreciated as much as 0.8 percent to 101.42 per dollar, the weakest since April 2009.
Jobless Claims
The number of Americans filing claims for jobless benefits unexpectedly dropped last week and the average over the past month fell to the lowest level since before the last recession, the Labor Department said yesterday.
The U.S. central bank is buying $85 billion of Treasury and mortgage debt each month to support the economy by capping borrowing costs. The Bank of Japan is purchasing up more than 7 trillion yen ($69.1 billion) of debt each month in expanded easing measures announced on April 4.
Bernanke is scheduled to speak at 8:30 a.m. in Chicago, according to the website of the Fed Bank of Chicago. The regional reserve bank’s President Charles Evans will give introductory remarks beforehand, the schedule says.
The Fed’s asset purchases have done little to boost economic growth, Martin Feldstein, a professor of economics at Harvard University, wrote yesterday in an article on the Wall Street Journal website.
“The time has come for the Fed to recognize that it cannot stimulate growth and that a stronger recovery must depend on fiscal actions and tax reform by the White House and Congress,” Feldstein wrote.
The central bank will buy as much as $1.75 billion of Treasuries maturing between February 2036 and February 2043 today, according to the Fed Bank of New York’s website.
Domestic investors in Japan became buyers of bonds outside the nation after the longest period of sales in three years.
Money managers boosted their holdings of overseas bonds and notes by 514.3 billion yen in the two weeks ended May 3, the Ministry of Finance said today. They had cut them in the six weeks through April 19, the longest run since January 2010.
To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
