BLBG:Treasuries Gain as Europe Ministers Withhold Greek Aid Before Budget Vote
Feb. 10 (Bloomberg) -- Treasuries (USGG3YR) rose for the first time in four days as European finance ministers withheld a rescue package for Greece pending the nation’s approval of new austerity measures.
Investors sought the relative safety of U.S. debt after Asian stocks fell and Greek Finance Minister Evangelos Venizelos said a parliamentary vote set to begin this weekend amounted to a ballot on euro membership. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. increased his holdings of Treasuries to the most since July 2010.
“We’re not sure what Greece is going to do next,” said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender. “The bid is coming back” in the Treasury market.
U.S. 10-year yields declined four basis points, or 0.04 percentage point, to 2 percent at 9:11 a.m. London time, according to Bloomberg Bond Trader prices. The 2 percent security due February 2022 advanced 3/8, or $3.75 per $1,000 face amount, to 100 1/32. Thirty-year yields fell three basis points to 3.16 percent, paring an increase this week to four basis points.
The MSCI Asia Pacific Index of shares fell 1.4 percent, set for the biggest decline this year. The Stoxx Europe 600 index fell 0.5 percent.
Insufficient Austerity Measures
Treasuries underperformed German bonds on a risk-adjusted basis this year. U.S. government bonds handed investors a 0.17 percent loss compared with a 0.15 percent decline from its European peer after volatility is taken into account. Risk- adjusted returns are calculated by dividing total return by daily price swings.
Venizelos said his euro-area counterparts refused to approve a 130 billion-euro ($172.4 billion) aid package for Greece yesterday at an emergency meeting because the government fell short of austerity demands.
Investors have spent the week watching developments in Greece, sending yields higher over the past three days on speculation lawmakers would make the spending cuts needed to win the bailout package and make a March 20 debt payment.
“In short: no disbursement without implementation,” Luxembourg Prime Minister Jean-Claude Juncker said in Brussels late yesterday after chairing emergency talks of euro-area policy makers.
Bond Holdings Boosted
Europe’s struggle to contain a sovereign-debt crisis has driven investor demand for refuge assets, making U.S. Treasuries must-have securities in the past year.
They returned 10 percent in the 12 months to yesterday, and Treasury Inflation Protected Securities handed investors a 17 percent gain, according to Bank of America Merrill Lynch indexes. A gauge of bonds around the world returned 7.6 percent, the data show.
The MSCI All Country World Index (MXWD) of stocks fell 1.7 percent in the period after accounting for reinvested dividends, according to data compiled by Bloomberg.
Gross boosted the proportion of U.S. government and Treasury debt in Pimco’s $250.5 billion Total Return Fund (PTTRX) to 38 percent in January from 30 percent in December, according to the company’s website.
The central bank is in the process of 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.
No Economic Momentum
The Fed is scheduled to buy as much as $1.5 billion of TIPS due from July 2018 to February 2041 today as part of the plan, according to the New York Fed’s website.
U.S. central bankers announced Jan. 25 they will hold their target for overnight bank lending near zero until at least late 2014. Fed Chairman Ben S. Bernanke said policy makers were considering buying bonds to sustain the expansion.
The U.S. trade deficit probably widened in December to the most in six months, economists said before a government report today. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment was probably 74.8 for February, versus the 11-month high of 75 in January.
“I don’t think the U.S. economy is gaining momentum,” said Hiromasa Nakamura, a senior investor in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $43.2 billion. “Housing prices are falling and the job market isn’t that strong.”
Ten-year rates will decline to 1.5 percent by June, said Nakamura, who predicted last year’s decline in yields.
He’s in the minority. The 10-year yield will advance to 2.55 percent by year-end, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net;
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
