BLBG:Treasuries Snap Gain Before Auction Announcement, European Debt Summit
Treasuries snapped yesterday’s steepest gain in almost a month before the U.S. announces the size of four debt auctions next week and European officials meet to address the region’s debt crisis.
The additional yield that investors demand to hold 10-year German bunds instead of same-maturity U.S. notes fell to six basis points from 34 basis points last week. U.S. yields may be too low to keep attracting buyers after a rally in Treasuries made them the top-performing debt in the past six months.
“The flight to quality may be finished for a while,” said Tsutomu Komiya, a bond investor at Daiwa Asset Management Co. in Tokyo, which oversees the equivalent of $119.2 billion and is a unit of Japan’s second-biggest brokerage. “The current level is less attractive because yields have fallen.”
U.S. 10-year rates were little changed at 2.04 percent at 11:48 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due November 2021 changed hands at 99 5/8.
The yield fell six basis points yesterday, the most since Nov. 9. The record low was 1.67 percent on Sept. 23.
The U.S. government will auction $32 billion in three-year notes on Dec. 12 and $21 billion in 10-year debt on Dec. 13, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance.
The U.S. will also sell $13 billion in 30-year bonds on Dec. 14 and $12 billion in five-year Treasury Inflation Protected Securities on Dec. 15, Wrightson predicts.
European Summit
European leaders are scheduled to begin a summit in Brussels today after the region’s debt crisis spread to Italy last month, boosting yields on the nation’s debt to euro-era record highs.
The European Central Bank will hold a policy meeting today. It will cut the benchmark interest rate by a quarter percentage point to 1 percent, said 53 of 58 economists in a Bloomberg News survey. The ECB may also loosen collateral criteria to give banks greater access to cash and offer longer-term loans, said three euro-area officials with knowledge of the deliberations.
Treasuries maturing in 10 years or longer advanced 19 percent in the past six months, the best currency-adjusted performance among 144 bond indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
Treasuries rose yesterday after Standard & Poor’s warned the European Union that it may lose its top credit rating following a similar warning on Germany and 14 other euro members.
Credit Rating
The EU’s AAA long-term grade and the rankings of some of the region’s largest banks, including BNP Paribas SA, Commerzbank AG and Deutsche Bank AG, may be cut by S&P. The ratings are on “CreditWatch negative,” the company said.
Yields will rise as U.S. economic growth quickens next year, Bloomberg surveys of economists show. The 10-year rate will advance to 2.73 percent by the close of 2012, based on the responses of banks and securities companies, with the most recent forecasts given the heaviest weightings.
The number of Americans claiming unemployment benefits for the first time probably fell to 395,000 last week from 402,000, according to the median prediction of economists surveyed by Bloomberg before the government reports the figure today. A Thomson Reuters/University of Michigan index of consumer sentiment rose to 65.8 in December from 64.1 in November, a separate survey showed before the figure tomorrow.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; wgoodman@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
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