BLBG:Treasury Yield Near 4-Month Low on Fed Buying Prospects
Treasuries were little changed as the U.S. government prepared to sell $32 billion of three-year notes today in the first of three auctions to be held this week.
Benchmark 10-year securities erased earlier gains as U.S. stock futures advanced, damping demand for the safest assets. Ten-year yields were within seven basis points, or 0.07 percentage point, of the lowest since December as Federal Reserve Chairman Ben S. Bernanke signaled in a speech yesterday that there was room for improvement in the economy, spurring bets the central bank will maintain asset purchases.
“Treasuries are struggling to rise as we have more supply coming into the market this week and the stocks are doing pretty well,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “Those factors offset the positive from Bernanke’s comments. It’s likely Treasuries will move in a tight range in the near term.”
The U.S. 10-year note yield was at 1.75 percent as of 6:47 a.m. in New York, according to Bloomberg Bond Trader prices. The 2 percent security due in February 2023 traded at 102 1/4. The rate dropped to 1.68 percent on April 5, the lowest level since Dec. 12.
U.S. government bonds have handed investors a 0.8 percent return in April, set for a third month of gains, the longest stretch since January 2012, according to the Bank of America Merrill Lynch’s U.S. Treasury Index.
Note Auction
The three-year notes being sold today yielded 0.35 percent in pre-auction trading, compared with 0.41 percent at the previous offering on March 12. The U.S. will sell $21 billion of 10-year securities tomorrow and $13 billion of 30-year bonds on April 11.
The yield on previously issued three-year notes was 0.34 percent after dropping to 0.30 percent on April 5, the lowest since Oct. 4.
“Today the economy is significantly stronger than it was four years ago, although conditions are clearly still far from where we would all like them to be,” Bernanke said in a speech in Stone Mountain, Georgia.
Treasuries have returned 0.6 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 1 percent and U.K. gilts rose 1.9 percent.
Fed Purchases
The MSCI All-Country World Index advanced 0.3 while Standard & Poor’s 500 Index futures rose 0.1 percent, extending yesterday’s 0.9 percent gain. The dollar declined against the euro and the yen.
The Fed is buying government and mortgage debt at a rate of $85 billion a month in a bid to boost expansion and reduce unemployment. The central bank plans to buy as much as $1.75 billion of securities due between February 2036 and February 2043 today, according to the New York Fed’s website.
Bernanke said last month further improvements in employment are needed for the central bank to consider reducing its record monetary easing.
The Labor Department will say on Thursday that claims for jobless benefits dropped to 360,000 in the week ended April 6, according to the median estimate in a Bloomberg News survey of economists. Applications reached 385,000 in the period through March 30, the most in almost four months.
“I don’t think the Fed can really wait until all their objectives are met before reducing quantitative easing,” said Ali Jalai, who trades U.S. bonds in Singapore at Scotiabank, part of Bank of Nova Scotia. “Ten-year Treasuries may sell off” as a result of a reduction in purchases, Jalai said.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
