WSJ: US Treasurys Gain As Global Growth Worries Resurface
NEW YORK (Dow Jones)--U.S. Treasury prices climbed Monday as global growth worries resurfaced, helping the haven market reclaim some ground lost over the last three sessions.
China, the world's second-largest economy, reported a surprisingly large trade deficit of $31.5 billion for February. This reflected a marked slowdown in demand for its exports, especially from Europe, rekindling concerns about the strength of the global economy.
Meanwhile, the Organization for Economic Cooperation and Development's leading indicator for China fell again, signaling the economy is likely to slow further.
In Europe, attention already is shifting to Portugal after Greece carried out its bond restructuring last week. The Greece debt-swap cheer was short-lived, and according to many analysts, surprisingly muted. Its new bonds have been priced at 25 cents on the dollar, reflecting investors' ongoing lack of confidence that the country will fix its financial problems.
Still, Nomura's rate-strategy team believes the market is poised for higher yields now that the euro-zone crisis is "likely to take a temporary hiatus." The firm said the flight-to-quality buying stirred up by Europe was responsible for about 50 basis points in the drop in 10-year yields, pinning this maturity's fair value at 2.4% when taking the Federal Reserve's bond buying into account.
Benchmark 10-year notes recently rose 10/32 in price to yield 2.002%.
Treasury prices shot to session highs as U.S. trading got under way. The 30-year bond gained 24/32 to yield 3.149%, while three-year notes were 1/32 higher to yield 0.438%. Debt prices move inversely to yields.
The market gained even with a looming wave of supply this week, starting with a $32 billion three-year note auction Monday afternoon. A $21 billion 10-year offering and $13 billion 30-year auction are planned for Tuesday and Wednesday, respectively. Supply typically weighs on the market as investors aim to lower prices ahead of the sale.
The Federal Reserve's policy meeting Tuesday is another major focus for bond investors. It is near-consensus that no new easing initiatives will be announced after the gathering, but market participants are on the look-out for hints about how policy makers interpret the recent batch of encouraging economic data and whether they are still inclined to offer another round of stimulus.
