BLBG:Treasuries Gain 3rd Day as China Data Signal Slowdown
Treasuries rose for a third day after a private report showed manufacturing in China, the world’s second-largest economy after the U.S., may contract for a fifth month.
Government debt also gained before the Federal Reserve buys as much as $2.25 billion of securities due from 2022 to 2031 today as part of its plan to cap borrowing costs. A surge in yields this week to the highest level since October is attracting some investors.
“Once yields have stabilized, I’m going to be a buyer,” said Chungkeun Oh, a debt trader in Seoul at Industrial Bank of Korea (024110), South Korea’s largest lender to small- and medium-sized companies. The Chinese figures are “positive for Treasuries,” he said.
Ten-year rates fell one basis point, or 0.01 percentage point, to 2.28 percent as of 1:52 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The price of the 2 percent security due in February 2022 rose 3/32, or 94 cents per $1,000 face amount, to 97 1/2.
Yields climbed to 2.40 percent on March 20, the highest level since Oct. 28, though they are still less than the average of 3.87 percent over the past decade.
Japan’s 10-year rate was unchanged at 1.02 percent, snapping a three-day decline.
U.S. government securities erased losses sustained in early Asian trading as the preliminary index of China manufacturing from HSBC Holdings Plc and Markit Economics fell to 48.1 for March from 49.6 in February. A figure less than 50 indicates contraction.
Yield Survey
Ten-year Treasury rates will increase to 2.54 percent by year-end, according to a Bloomberg survey of banks and securities companies, with the most recent projections given the heaviest weightings.
Investors have been re-evaluating the prospects of further monetary stimulus since Fed policy makers raised their assessment of the economy on March 13.
An index of U.S. leading indicators probably rose 0.6 percent in February from January, based on a Bloomberg News survey of economists before the New York-based Conference Board reports the figure today. Initial claims for unemployment insurance fell to a four-year low, a separate report will show, based on a separate survey.
Japan had an unexpected trade surplus in February, according to a government report today.
‘Time to Cut’
Mitsubishi UFJ Asset Management Co. in Tokyo, a unit of Japan’s biggest publicly traded bank with the equivalent of $72 billion in assets, favors shorter maturities, those that fall less when yields rise. Federated Investors Inc. (FII), a Pittsburgh- based money manager that oversees $369.7 billion, is selling Treasuries.
“There’s pressure for yields to rise,” said Hideo Shimomura, who buys U.S. debt as chief fund investor at Mitsubishi UFJ Asset. “The economy is growing at a sustainable pace.”
It’s time to cut Treasury holdings, according to Federated.
“The best days are well behind us,” Joseph Balestrino, a fixed-income strategist for the company, said yesterday on Bloomberg Television’s “Street Smart” with Trish Regan and Adam Johnson. “It’s now been five to six months of continually better-than-expected economic data.”
Federated’s higher-yielding and emerging-market bond funds are drawing money from investors, Balestrino said.
Next Week’s Auctions
Treasuries have handed investors a 1.7 percent loss this year as of yesterday, according to Bank of America Merrill Lynch indexes. U.S. high-yield bonds returned 5.2 percent, while dollar-denominated debt issued by emerging-market governments gained 4.2 percent, the indexes show.
The Treasury Department is scheduled to announce today the size of three note sales scheduled for next week.
The U.S. will probably auction $35 billion of two-year securities on March 27, $35 billion of five-year debt on March 28 and $29 billion of seven-year notes on March 29, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance. The amounts would be the same as the last time the government sold the securities in February.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
