BLBG:Treasuries Gain First Time in 4 Days Before Jobs Data, EU
Treasuries rose for the first time in four days before a government report that economists said will show initial claims for unemployment insurance increased last week as the job market struggles to improve.
Ten-year note yields slipped from a four-week high as European Union leaders prepared to meet in Brussels. Thirty-year rates slid the most since Oct. 10 after German Chancellor Angela Merkel said Greek reforms were moving at a “snail’s pace,” boosting demand for the safest securities. The U.S. Treasury plans to buy as much as $2.25 billion of bonds due from February 2036 to August 2042, according to the Federal Reserve Bank of New York’s website, part of its plan to cap borrowing costs.
“Jobless claims have been on an improving trend but they’re still high relative to history,” said Padhraic Garvey, head of developed markets debt at ING Groep NV in Amsterdam. “We’ve had a reasonably big move in Treasuries over the past couple of days and this is just a slight setback today.”
The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 1.80 percent at 10:57 a.m. London time, according to Bloomberg Bond Trader prices after rising to 1.82 percent, the most since Sept. 19. The 1.625 percent note due August 2022 gained 6/32, or $1.88 per $1,000 face amount, to 98 14/32.
Jobless Claims
Yields on the 30-year bond fell four basis points to 2.97 percent after losing as much as four basis points to 2.96 percent. The yield climbed above 3 percent yesterday for the first time since Sept. 19.
U.S. jobless claims rose to 365,000 last week from 339,000 in the previous period, according to the median forecast of 49 economists surveyed by Bloomberg before the Labor Department data at 8:30 a.m. in New York. A 30,000 decline the week before raised speculation the government had difficulty adjusting the data for seasonal swings at the start of a quarter.
The benchmark note rate faces a level of so-called resistance at 1.81 percent, the 200-day moving average, according to Craig Collins, managing director of rates trading at Bank of Montreal (BMO) in London.
The U.S. plans to auction $7 billion of 30-year Treasury Inflation Protected Securities, with the securities poised to draw a record-low yield.
The yield on 30-year TIPS fell one basis point to 0.50 percent. The previous sale of the securities on June 12 attracted an auction rate of 0.52 percent, the least since the government began selling them in 1998.
Investors bid for 2.64 times the amount of debt available in June, up from 2.46 times in February.
Alternative Investment
Inflation protection isn’t the only reason to buy the bonds. Like all U.S. government debt, the securities are a haven for investors seeking safety, which can explain why they gain even as inflation stays below its 10-year average.
The securities are also an alternative to conventional Treasuries whose yields are approaching record lows.
The difference between rates on 30-year bonds and same- maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt, shrank one basis point to 2.46 percentage points. The 10-year average is 2.47 percentage points. TIPS have returned 6 percent in 2012, versus 1.4 percent for conventional Treasuries, according to Bank of America Merrill Lynch indexes.
The U.S.’s fiscal position has put its debt rating at risk, Scott Mather, head of global portfolio management at Pacific Investment Management Co., which has $1.82 trillion in assets, said in Wellington.
“The U.S. will get downgraded,” Mather said. “It depends on what the end of the year looks like, but it could be fairly soon after that.” Pimco is based in Newport Beach, California, and runs the world’s biggest bond fund.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
