BLBG: U.S. Treasuries Advance as Retail Sales Fall More Than Forecast
Treasuries rose as sales at U.S. retailers fell in December for the sixth consecutive month, plunging more than twice as much as forecast and fueling speculation the economic slump is deepening.
Ten-year note yields declined for the fifth straight day as the recession spurred demand for the relative safety of government debt. Defaults by corporate borrowers may rise to 15.1 percent in the next 12 months, according to Moody’s Investors Service. One-month bill rates are near zero percent as investors buy the shortest-term U.S. securities, deemed the safest.
“We all knew that consumer spending was weakening, but I think people were surprised by the magnitude and velocity of the weakening,” said Alex Li, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, one of 17 primary dealers that trade with the Federal Reserve. “It will probably take much longer for us to get out of this recession, and so it makes a lot more sense for investors to stay with Treasuries for liquidity and safety.”
The benchmark 10-year note’s yield fell seven basis points, or 0.07 percentage point, to 2.22 percent at 8:50 a.m. in New York, according to BGCantor Market Data. The price of the 3.75 percent security maturing in November 2018 climbed 22/32, or $6.88 per $1,000 face amount, to 113 14/32.
Yields on two-year notes decreased two basis points to 0.72 percent. Thirty-year bond yields dropped five basis points to 2.95 percent.
Retail Sales
Purchases at U.S. retailers dropped 2.7 percent last month, extending the longest stretch of declines since records began in 1992, a Commerce Department report showed. The median estimate of 77 economists surveyed by Bloomberg News was for sales to drop 1.2 percent.
President-elect Barack Obama lobbied senators yesterday to support his economic proposals and to tap the second half of a $700 billion financial-markets rescue fund approved under President George W. Bush.
With the U.S. economy in recession, Obama is also asking Congress for his own $775 billion economic package. The U.S. budget deficit soared to a record $485.2 billion in the first three months of the fiscal year that started Oct. 1, the Treasury Department said yesterday in Washington.
The difference between what banks and the U.S. pay to borrow for three months was less than 1 percentage point for a second day, indicating government and central bank efforts to thaw frozen credit markets are beginning to work. The so-called TED spread narrowed to 97 basis points from 4.64 percentage points on Oct. 10, the most since Bloomberg began compiling the data in 1984.
