Treasuries rose following four days of declines before an industry report economists said will show sales of existing homes fell in September, highlighting an uneven rebound in the U.S. housing market. Today’s recovery in bonds repeats a pattern seen this week, where Treasuries begin the Asian session little changed or with a gain, only to fall in London or New York trading hours. Benchmark 10-year yields have climbed 16 basis points this week, or 0.16 percentage point, the most in a month. Yields jumped Oct. 17 when a government report showed housing starts surged. “The current level is a buying opportunity,� said Hiromasa Nakamura, who invests in U.S. debt from Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $41.5 billion. “Many market participants expect the housing market to recover, but it will take time for housing to significantly recover.� Nakamura said he favors the longest maturities, those that will rise most if yields fall. U.S. 10-year yields declined 1.6 basis points to 1.82 percent as of 6:53 a.m. in London, according to Bloomberg Bond Trader data. The price of the 1.625 percent note due in August 2022 climbed 1/8, or $1.25 per $1,000 face amount, 98 1/4. Yesterday’s high yield of 1.83 percent was the most in a month. The rate rose past its 200-day moving average on Oct. 17, and it has held above the so-called resistance level since then, based on closing prices. Japan’s 10-year government rate slid one basis point today to 0.78 percent. This year’s low was 0.72 percent set in July. Home Sales U.S. existing home sales probably fell 1.7 percent in September from the month before, according to the median forecast of 78 economists surveyed by Bloomberg News before the National Association of Realtors reports the figure today. They rose 7.8 percent in August. Housing starts rose 15 percent in September from August to a four-year high, government data showed Oct. 17. The Federal Reserve is swapping short-term Treasuries in its holdings for longer-term securities to put downward pressure on borrowing costs, part of its efforts to spur the economy. It plans to sell as much as $1.1 billion of Treasury Inflation Protected Securities due from April 2014 to January 2016 today, according to the Fed Bank of New York’s website. European leaders committed to their goal of creating a euro-area bank supervisor by year-end, according to officials at a European Union summit in Brussels today. In China, the government won’t provide big economic stimulus and a strong rebound in growth is unlikely, Song Guoqing, an adviser to the People’s Bank of China, said yesterday. Safe Haven Ten-year Treasury yields may fall to 1 percent, said Gary Shilling, president of A. Gary Shilling & Co., an economic forecasting company in Springfield, New Jersey. Thirty-year rates, now 3 percent, may drop to 2 percent, he said yesterday on Bloomberg Television’s “Street Smart� with Trish Regan and Adam Johnson. “We are setting ourselves up for a global recession,� he said. “Treasuries are the safe haven, one of the few in the world. More and more people are beginning to worry about deflation,� or a general drop in prices. Bidders in a $7 billion sale of 30-year inflation-indexed bonds yesterday took the opposite view, willing to accept a record-low yield of 0.479 percent for securities that guard against the threat of rising consumer prices. Inflation, Returns The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.56 percentage points. The average over the past decade is 2.17 percentage points. U.S. government securities maturing in 10 years and longer have handed investors a 5 percent loss in the last three months, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. South African bonds due in 10 years or more are the only similar-maturity debt that has performed worse, based on returns that account for both the debt prices and changes in currencies against the dollar. 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.

Source