BLBG:Treasuries Snap Two-Day Decline as Greece Fails to Produce Economic Plan
Treasuries snapped a two-day decline after Greek leaders failed to agree on economic measures needed to earn a second aid package, driving investor appetite for the relative safety of U.S. debt.
Demand for a haven from Europe’s fiscal crisis sent U.S. Treasuries surging in the past year, with debt due in 10 years or longer returning 30 percent. The gain is second only to Ireland among 144 government bond indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, after accounting for currency changes. The Treasury Department is scheduled to auction $16 billion of 30-year bonds today.
“Triple A bonds are where we should be invested,” said Hideo Shimomura, who helps oversee the equivalent of $77.8 billion in Tokyo as chief fund investor at Mitsubishi UFJ Asset Management Co., a unit of Japan’s biggest publicly traded bank. “There’s a fear of some kind of default, not necessarily this quarter but maybe in the future” in Greece, he said.
U.S. 10-year yields were little changed at 2.02 percent as of 2:18 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security maturing in February 2022 changed hands at 99 26/32.
Shimomura said Treasuries rank among the haven quality bonds, and he would consider buying 10-year notes with yields at 2.10 percent. The U.S. is graded AAA by Moody’s Investors Service and Fitch Ratings, while Standard & Poor’s ranks it AA+.
Japan’s 10-year yield was unchanged at 0.99 percent. It has been at 1 percent or lower for two weeks.
‘Issues Outstanding’
Greek Finance Minister Evangelos Venizelos said there is still uncertainty on the terms of a 130 billion-euro ($172 billion) rescue package for Greece ahead of a meeting of euro area finance ministers today.
“There are issues outstanding that must be resolved by the time the eurogroup meets,” Venizelos told reporters in Athens today after a meeting with Prime Minister Lucas Papademos and European Union and International Monetary Fund officials that ended just before 6 a.m. local time. “As the prime minister said, there is agreement on all the issues bar one.”
The 30-year U.S. bonds that investors will bid for today yielded 3.16 percent in pre-sale trading, versus the record low auction yield of 2.925 percent set in December.
At the prior offering in January, traders submitted offers to buy 2.60 times the amount of available debt, versus the average of 2.66 percent for the past 10 monthly auctions.
Indirect bidders, the investor group that includes foreign central banks, purchased 31.9 percent of the securities, compared with the 10-sale average of 33.
Direct bidders, non-primary dealers buying for their own accounts, bought 7.2 percent, the least in 10 months.
Corporate Bonds
The government will announce today the size of a 30-year sale of Treasury Inflation Protected Securities scheduled for Feb. 16. The auction will probably be for $10 billion, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance. The money will be so-called new cash because the sale doesn’t coincide with any maturing debt, according to Wrightson.
Company bonds are poised to gain because they offer higher yields than government securities, Anthony Valeri, a fixed- income strategist at LPL Financial LLC in San Diego, wrote in a report dated yesterday.
“Corporate bond sectors have the potential to have the best return in 2012,” according to LPL, provider of investment advice and brokerage services to 12,500 financial advisers.
Relative Returns
Company debt in the U.S. has returned 2.4 percent this year as of yesterday, according to Bank of America Merrill Lynch data. An index of the securities yields 2.97 percentage points more than Treasuries, the data show. Demand for the securities has narrowed the spread to the least since August.
U.S. government debt has handed investors a 0.4 percent loss this year. TIPS gained 1.6 percent, the indexes indicate.
The MSCI All-Country World Index of stocks returned 9.4 percent in the period after accounting for reinvested dividends.
The Federal Reserve is replacing $400 billion of shorter- maturity Treasuries in its holdings with longer-term debt to cap borrowing costs and spur the economy under a program it plans to conclude in June.
The central bank is scheduled to buy as much as $5 billion of securities due from February 2018 to November 2019 today under the plan, according to the New York Fed’s website.
A Labor Department report today may show initial claims for jobless insurance were little changed last week at 370,000, below last year’s average of 409,000, according to a Bloomberg News survey. U.S. gross domestic product will expand 2.3 percent in 2012, versus 1.7 percent in 2011, the surveys show.
Economic growth is slow enough to make Shinji Kunibe, chief portfolio manager for fixed-income investment in Tokyo at Nissay Asset Management Corp., bullish on Treasuries.
“Yields will gradually decline as developed economies linger at low growth rates,” he said. Echoing Mitsubishi UFJ, Kunibe said he may buy if 10-year yields rise past 2 percent. Nissay Asset manages the equivalent of $70 billion.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
