BLBG: Treasury Yield Near Seven-Week High Against Group-of-Seven Peers
Treasury yields were one basis point away from a seven-week high relative to their Group of Seven peers, bolstering speculation the premium will lure investors to America’s debt.
U.S. government securities due in a decade and more have returned 19 percent this year, the best performance in dollar terms among 144 bond indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies. The Treasury is scheduled today to report overseas holdings of U.S. securities for September, after foreign ownership of the nation’s debt climbed to a record in August.
“Treasuries are looking relatively attractive,” said Tomohisa Fujiki, the head of interest-rate strategy in Tokyo at BNP Paribas SA, whose New York unit is one of the 22 primary dealers that underwrite the U.S. debt. “The U.S. should be attracting money.”
The benchmark 10-year Treasury yielded 2.33 percent as of 6:48 a.m. in London, according to Bloomberg Bond Trader data. The price of the 2.25 percent note due in November 2024 was 99 10/32.
Ten-year Treasuries yielded 85 basis points more than the average of their G-7 peers. The premium increased to 86 basis points yesterday, the widest level since Sept. 30.
Japanese Auction
In Japan, investors swapped longer maturities for bills, seeking safety on speculation Prime Minister Shinzo Abe is intending to call an early election.
Ten-year Japanese yields climbed 2 1/2 basis points to 0.505 percent. A one-year bill auction drew a negative yield for the first time at minus 0.0029 percent.
Australia’s 10-year yield increased two basis points to 3.29 percent. A basis point is 0.01 percentage point.
Foreign ownership of U.S. government debt rose to $6.07 trillion in August, about half of the $12.4 trillion of publicly traded securities. A separate government report will show producer prices declined for a second month in October, based on a Bloomberg News survey of economists.
The extra yield 10-year Treasuries offer over similar-maturity U.K. gilts widened to 22 basis points yesterday, the most in 15 months. The premium over German 10-year bunds was 154 basis points after reaching 157 in September, the biggest difference in 15 years.
Overseas demand for U.S. debt has helped push Bloomberg’s dollar index, which tracks the greenback against 10 if its peers, up for a fifth month.
Higher Yields
U.S. yields are higher than those of other countries because of speculation the U.S. economy will be strong enough for the Federal Reserve to raise interest rates next year.
Fed Governor Jerome Powell said yesterday he expects the U.S. central bank to increase borrowing costs in 2015, echoing remarks from New York Fed President William C. Dudley earlier this month.
Overseas demand may not be enough to keep yields from climbing as the Fed boosts rates, said Will Tseng, a money manager in Taipei at Mirae Asset Global Investments Co., which oversees $62.2 billion.
“As long as people still believe the economy is growing, they will have less demand for safety assets,” he said. “The hawkish tone of the Fed keeps dragging Treasury yields higher.”
Tseng said he is holding emerging-market bonds because they yield more than Treasuries.
The Fed has kept the target for the federal funds rate, which banks charge each other on overnight loans, in a range of zero to 0.25 percent since December 2008.
The implied yield on 30-day fed fund futures contracts expiring in December 2015 was 0.52 percent, the first month that prices in a quarter-point increase.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Nicholas Reynolds, Tomoko Yamazaki
