BLBG: Treasury Two-Year Yields Near 4-Week Low on Stocks, Fed Outlook
By Lukanyo Mnyanda
June 22 (Bloomberg) -- Treasury two-year yields stayed near the lowest level since May as a decline in stocks boosted demand for the safest assets and as investors speculated the Federal Reserve will keep interest rates near zero.
Treasuries of all maturities are headed for the best first half in a decade as investors bet reduced inflationary pressures will prompt policy makers to repeat their pledge to keep borrowing costs low for an “extended period.” The MSCI World Index fell 0.3 percent, ending 10 days of gains. The Treasury is scheduled to sell a combined $108 billion of two-, five- and seven-year notes this week.
“It’s likely that Fed policy will contribute to yields staying at fairly low levels for some time,” said Elwin de Groot, a senior market economist at Rabobank Groep in Utrecht, Netherlands. “We’ve seen a slight improvement in risk appetite, but the underlying tone remains downbeat.”
The two-year note yielded 0.72 percent as of 7:42 a.m. in London, according to BGCantor Market Data. The yield fell to 0.69 percent on June 17, the lowest level since May 25. The 0.75 percent security due May 2012 traded at 100 2/32. The 10-year yield held at 3.25 percent.
The government will auction $40 billion in two-year debt today, $38 billion in five-year notes tomorrow and $30 billion in seven-year securities on June 24. The total is $5 billion less than last month’s sales.
The Federal Reserve will hold the benchmark interest rate at a record low range of zero to 0.25 percent at this week’s meeting, according to all of the 96 economists surveyed by Bloomberg News.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
