BLBG:Treasuries Head for First Monthly Gain Since November
Treasuries rose, extending their first monthly gain since November, before a report that economists said will show durable goods orders fell, boosting the case for the Federal Reserve to maintain bond purchases.
Longer maturities led gains as an inconclusive election in Italy along with U.S. spending cuts set for March 1 are increasing investor appetite for the safest assets. The Treasury plans to auction $29 billion of seven-year notes today as Fed Chairman Ben S. Bernanke prepares to testify before lawmakers for a second day. He yesterday signaled the Fed is prepared to keep buying bonds at its present pace as he dismissed concerns record easing risks sparking inflation.
“The resurgence of euro-area tensions post the Italian elections has seen a flight to quality and bid for safe-haven assets which has benefited Treasuries,” said Richard McGuire, a senior fixed-income strategist at Rabobank International in London. “We have the looming fiscal cliff in the U.S. and yesterday’s testimony from Bernanke showing the Fed was still open to maintaining its current very accommodative stance.”
The benchmark 10-year yield fell two basis points, or 0.02 percentage point, to 1.87 percent at 10:31 a.m. London time, according to Bloomberg Bond Trader prices. The 2 percent note due February 2023 gained 5/32, or $1.56 per $1,000 face amount, to 101 7/32.
U.S. government debt returned 0.6 percent in February, after sliding 1 percent the previous month, according to Bank of America Merrill Lynch indexes.
Durable Goods
Orders for durable goods declined 4.7 percent in January, when they increased 4.3 percent, according to a Bloomberg News survey of economists before the Commerce Department report at 8:30 a.m. in Washington. Separate data will show existing home sales rose, according to the surveys.
Treasuries began the week with their biggest one-day rally since November as Italy concluded its election without a winner.
European Union leaders urged the country’s political factions to form a government committed to austerity measures the nation implemented to help pay its debt and keep the euro as its currency.
“Everyone is looking for risk-free assets right now,” said Kim Youngsung, head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor with the equivalent of $104 billion in assets. “We had forgotten about the European debt crisis for a while, but the Italian election was a reminder that it’s an ongoing problem.”
Spending Cuts
Congress mandated $1.2 trillion in across-the-board spending cuts to begin March 1 and be spread over nine years as part of a 2011 agreement to increase the U.S. debt limit.
Federal Reserve Chairman Ben. S. Bernanke is scheduled to testify before U.S. lawmakers starting at 10 a.m. in Washington.
“We do not see the potential costs of the increased risk- taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery,” Bernanke said yesterday in testimony to the Senate Banking Committee.
The seven-year notes being sold today yielded 1.26 percent in pre-auction trading. The U.S. allotted $35 billion of five- year securities yesterday and the same amount of two-year debt on Feb. 25.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
