BLBG:Treasuries Decline for Second Day Before $72 Billion Debt Sales
Treasuries declined for a second day as the nation prepares to sell three-year notes today in the first of three auctions this week totaling $72 billion.
The difference between yields on Treasury three-year notes and 30-year bonds widened to the most in almost two years as investors bet the Federal Reserve will begin to reduce its asset-purchase stimulus program next month. The Fed is buying $85 billion of Treasuries and mortgage debt each month to put downward pressure on interest rates. The U.S. is scheduled to sell $32 billion of three-year notes today, $24 billion of 10-year debt tomorrow and $16 billion of 30-year bonds on Aug. 8.
“It might be a bit of concession building here,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “People are not that keen on increasing their positions with the reduction of asset purchases looming in September. We assume it will be a reduction of $25 billion of Treasury purchases, which would be more than half of what they are buying now.”
Benchmark 10-year yields rose two basis points, or 0.02 percentage point, to 2.66 percent at 10:45 a.m. London time, according to Bloomberg Bond Trader data. The price of the 1.75 percent note due in May 2023 fell 5/32, or $1.56 per $1,000 face amount, to 92 1/4.
Yields were little changed at 0.60 percent on three-year notes and increased two basis points to 3.75 percent for 30-year bonds. The so-called spread between the two increased to 3.15 percentage points, the widest level since September 2011, according to data compiled by Bloomberg.
Worst Performers
U.S. notes and bonds due in a decade or more are the world’s worst-performing government securities, indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies show. The securities fell 10 percent in the three months ended yesterday, the biggest loss of 144 indexes.
Notes due in one to three years were little changed. Shorter-maturity Treasuries tend to track what the Fed does with its benchmark interest rate, which banks charge each other on overnight loans. Policy makers have kept the target for the rate in a range of zero to 0.25 percent since 2008.
Stocks in the MSCI All-Country World Index returned 2.7 percent including reinvested dividends, according to data compiled by Bloomberg.
“The economy is improving,” said Hajime Nagata, who helps oversee the equivalent of $120.3 billion as an investor in Tokyo at Diam Co., a unit of Dai-ichi Life Insurance Co. “Thirty-year bonds are not favorable. People prefer to hold stocks.”
The previous U.S. three-year auction, on July 9, drew bids for 3.35 times the amount of debt offered. The average for the last 10 sales is 3.44 times. The notes being sold today yielded 0.63 percent in pre-auction trading.
Indirect bidders, the investor class that includes foreign central banks, bought 35.6 percent of the securities, the most at the monthly auctions since September.
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.
