BLBG:Treasuries Gain for Second Day Before U.S. Retail-Sales Report
U.S. Treasuries advanced for a second day, with 10-year notes paring a weekly decline, before a report that economists said will show retail sales in the world’s largest economy stagnated in March.
U.S. government securities dropped 0.5 percent this week through yesterday, leaving them little changed for the year, Bank of America Merrill Lynch data show. Cyprus’s President Nicos Anastasiades will seek more help in addition to 10 billion euros of aid pledged by the euro area, said a government official speaking in Nicosia who asked not to be identified.
“Renewed jitters about Cyprus following news they need more for a bailout, plus expectations that U.S. retail sales today will be soft, are clearly giving Treasuries a boost,” said Nick Stamenkovic, a strategist at broker RIA Capital Markets Ltd. in Edinburgh. “We’re still stuck in this range of the last few weeks from 1.60 to 1.90 percent,” referring to the yield on U.S. 10-year notes.
Benchmark 10-year yields fell three basis points, or 0.03 percentage point, to 1.76 percent as of 7:44 a.m. New York time, according to Bloomberg Bond Trader data. The price of the 2 percent note maturing February 2023 rose 1/4, or $2.50 per $1,000 face amount, to 102 5/32.
Euro-area finance ministers are meeting in Dublin to review the state of Cyprus’s rescue package and the easing of bailout- loan terms for Ireland and Portugal.
Cyprus Request
Anastasiades will ask for a larger loan and more European Union structural funds and expects the request to be approved because of the difficult conditions his country faces, said the official. The president will make the request in letters to European Union President Herman Van Rompuy and European Commission President Jose Barroso. He has already spoken to EU Economic and Monetary Affairs Commissioner Olli Rehn, the official said.
Cyprus government spokesman Christos Stylianides said in an e-mailed statement Anastasiades hadn’t requested additional financial assistance.
“What the President of the Republic is discussing with European officials is the possibility of increasing European funds, for growth and social cohesion,” Stylianides said.
U.S. retail sales were unchanged last month, according to the median forecast of 85 analysts surveyed by Bloomberg News, after a 1.1 percent increase in February that was the biggest gain in five months.
Additional data today will show producer prices fell last month and consumer sentiment was little changed in April, according to Bloomberg News surveys of analysts.
Weekly Loss
Treasuries were still headed for the first weekly loss in five as Philadelphia Federal Reserve President Charles Plosser said the central bank should begin scaling back its bond purchases in the next few months.
The 10-year note yield has climbed five basis points since April 5, the first weekly increase since the period ended March 8. It is still less than half a percentage point away from the record low of 1.38 percent set in July.
The Fed should begin to trim its asset purchases, barring a slump in the economy, Plosser said yesterday in an interview with Bloomberg Television’s Susan Li in Hong Kong.
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 today plans to buy as much as $1.75 billion of bonds maturing between February 2036 and February 2043, according to the New York Fed’s website.
A cut should start “in just a few months’ time,” Plosser said.
Jobs Data
The Fed last met before the Labor Department reported April 5 the U.S. added 88,000 jobs in March, the slowest growth in nine months. Plosser, who does not vote on monetary policy this year, said that the report didn’t alter his view. “One month’s number is not enough for me to change my forecast,” he said.
The central bank pledged after its meeting to press on with purchases until the labor market improves “substantially.”
Several Fed officials favored cutting bond purchases this year and halting the record stimulus by year-end, according to minutes of the March 19-20 meeting of the Federal Open Market Committee released this week.
“It seems like the Fed wants to stop sooner than later,” said Ali Jalai, a Treasuries trader in Singapore at Scotiabank, a unit of Canada’s Bank of Nova Scotia (BNS), one of the 21 primary dealers that trade directly with the central bank. “The economy’s OK. I’m a little short,” with a bet that 10-year notes will fall.
The Fed will probably be slow to take back the money it has pumped into the economy, said Robert Michele, the global chief investment officer for fixed income, currencies and commodities at JPMorgan Asset Management Inc. in New York.
“The period of very low bond yields continues for quite some time,” he said yesterday on Bloomberg Television’s “Market Makers” with Sara Eisen and Erik Schatzker. “A rapid rise in interest rates is not something anyone wants to see right now, least of all the Federal Reserve,” said Michele, who helps oversee more than $154 billion.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
