BLBG:Treasuries Fluctuate on Bets Europeans Approaching Resolution of Crisis
Treasuries fluctuated as speculation European leaders will agree this week on measures to combat the debt crisis cut demand for the safest securities.
Thirty-year yields approached a three-week high as Greek Prime Minister Lucas Papademos received parliamentary approval for next year’s budget, which aims to almost halve the nation’s fiscal shortfall.
“There is, of course, some optimism about the outcome of the summit, so sentiment has turned more positive,” said Karsten Linowsky, a fixed-income strategist at Credit Suisse Group AG in Zurich. “If there’s less risk aversion, that would speak for a bit higher Treasury yields.”
The 30-year Treasury bond yield rose one basis point, or 0.01 percentage point, to 3.11 percent at 7:14 a.m. New York time, according to Bloomberg Bond Trader prices. The yield climbed to 3.15 percent on Dec. 1, the most since Nov. 14. The 3.125 percent security due November 2041 fell 7/32, or $2.19 per $1,000 face amount, to 100 1/4. Ten-year yields climbed less than one basis point to 2.09 percent.
A German-French proposal for closer economic ties in Europe gained the support of U.S. Treasury Secretary Timothy F. Geithner, who urged governments to erect a “stronger firewall” to resolve the crisis. Geithner, speaking in Berlin yesterday after talks with Finance Minister Wolfgang Schaeuble, praised the commitment to fiscal programs put in place by new governments in Spain, Italy and Greece, and said he was “very encouraged” by recent efforts.
Yield Spread
Treasuries underperformed their German counterparts, with the extra yield that investors get for holding 10-year bunds instead of similar-maturity U.S. paper falling six basis points to four basis points. The spread climbed to 34 basis on Nov. 29, the most since April 2009.
The Stoxx Europe 600 Index of shares gained 0.3 percent, and futures on the S&P 500 Index gained 0.4 percent.
U.S. 10-year yields will probably rise to 2.30 percent by the end of March, Credit Suisse’s Linowsky said. Economists surveyed by Bloomberg predict the yield will end the first quarter at 2.27 percent, according to the average forecast in a survey of financial companies, with the most recent forecasts given the heaviest weighting.
Treasuries have returned 8.9 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds made 7.3 percent and Japanese debt has gained 1.7 percent, the indexes show.
JPMorgan Survey
JPMorgan Chase & Co.’s weekly Treasury client survey showed the number of wagers on a decline in U.S. government securities among the bank’s investors exceeded bets for a gain for the first time since Sept. 12. Wagers on a drop increased to 17 percent on Dec. 5 from 11 percent on Nov. 28, while bets on an advance decreased to 13 percent from 19 percent, according to a report from analysts led by Terry Belton, global head of fixed- income and foreign-exchange research.
Demand for Treasuries has waned amid signs the U.S. will avoid slipping into another recession.
The number of Americans claiming unemployment benefits for the first time fell to 395,000 last week from 402,000, according to a Bloomberg News survey before the report tomorrow. The jobless rate dropped to 8.6 percent, the lowest level since March 2009, the Labor Department reported Dec. 2.
“The U.S. economy will grow gradually,” said Kei Katayama, leader of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd. in Tokyo, which oversees the equivalent of $63.8 billion including Asia’s second-biggest bond fund. “Yields will eventually go up, recognizing that the U.S. economy is not so bad.”
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
