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U.S. 10-Year Notes May Advance Amid Signs of Tame Inflation
July 8 (Bloomberg) -- Ten-year Treasury notes may advance for the fourth day in five in Europe on speculation accelerating U.S. jobs growth won't spur inflation.
``As it stands right now growth is holding in there,'' said Charles Diebel, a bond strategist at Royal Bank of Scotland Group Plc, in London. ``But it's very hard to get bearish on Treasuries unless inflation picks up.'' Diebel expects 10-year Treasuries to end the year yielding 4 percent.
The U.S. may say today that job growth more than doubled in June, rising to 200,000 from 78,000 in May, according to the median estimate of 72 economists. Consumer prices, excluding food and energy, probably rose 0.2 percent in June, according to a Bloomberg survey of economists, in line with the average of the past five years. The report is slated for release July 14.
The yield on the benchmark 10-year note fell 1 basis point, or 0.01 percentage point, to 4.06 percent as of 11:25 a.m. in London, according to bond broker Cantor Fitzgerald LP. It reached 3.93 percent yesterday. Yields move inversely to prices.
The price of the 4 1/8 percent note maturing in May 2015 rose 1/16, or 63 cents per $1,000 face amount, to 100 17/32.
Ten-year notes at their highs yesterday had the biggest gain since Dec. 3 after reports on the deadliest attack on London since World War II spurred investors to seek the safety of government debt.
Gains today may be curbed because some analysts, including bond strategist Jason Simpson at ABN Amro Bank NV in London, judge that the attacks won't hamper U.S. economic growth.
`Still Bearish'
``We're still bearish on Treasuries, as even given yesterday's events, we still think the fundamentals are looking good in the U.S.,'' said Simpson. ``Assuming payrolls come in with a good number then this will confirm the U.S. economy is fine.''
The 10-year yield may rise 10 to 20 basis points in the next month, Simpson said.
``You are seeing a stronger U.S. economy,'' said Damien McColough, head of fixed-income research at Westpac Banking Corp. The 10-year yield may rise to 4.2 percent in the next three months, he said.
A group calling itself the al-Qaeda Organization in Europe claimed responsibility for the London attacks, which killed at least 37 people and injured 700 others, and said they were in retaliation for ``the massacres carried out by Britain in Iraq and Afghanistan,'' according to a statement on a Web site.
The last major attack by al-Qaeda was in Madrid, Spain, on March 11, 2004, when 191 people were killed after bombs exploded at four train stations. Yields on 10-year notes fell 3 basis points that day.
`Reaction Similar'
``The initial market reaction yesterday was similar to the reaction we saw directly after the terrorist attacks in Madrid,'' said Jan Lambregts, head of Asia-Pacific research in the treasury department at Rabobank in Singapore. ``The London attacks will still be heavily on the market's mind.''
Signs of faster growth have led traders over the past week to increase bets on the number of times the Fed will raise interest rates in 2005.
Policy makers on June 30 lifted rates for the ninth time in a year, pushing up the target for overnight loans between banks by a quarter percentage point to 3.25 percent.
Yields on December Eurodollar futures were 4.05 percent, up from 3.84 percent a month ago. The futures settle at a three-month lending rate that has averaged 21 basis points more than the Fed's target over the past 10 years.
July 8 (Bloomberg) -- Ten-year Treasury notes may advance for the fourth day in five in Europe on speculation accelerating U.S. jobs growth won't spur inflation.
``As it stands right now growth is holding in there,'' said Charles Diebel, a bond strategist at Royal Bank of Scotland Group Plc, in London. ``But it's very hard to get bearish on Treasuries unless inflation picks up.'' Diebel expects 10-year Treasuries to end the year yielding 4 percent.
The U.S. may say today that job growth more than doubled in June, rising to 200,000 from 78,000 in May, according to the median estimate of 72 economists. Consumer prices, excluding food and energy, probably rose 0.2 percent in June, according to a Bloomberg survey of economists, in line with the average of the past five years. The report is slated for release July 14.
The yield on the benchmark 10-year note fell 1 basis point, or 0.01 percentage point, to 4.06 percent as of 11:25 a.m. in London, according to bond broker Cantor Fitzgerald LP. It reached 3.93 percent yesterday. Yields move inversely to prices.
The price of the 4 1/8 percent note maturing in May 2015 rose 1/16, or 63 cents per $1,000 face amount, to 100 17/32.
Ten-year notes at their highs yesterday had the biggest gain since Dec. 3 after reports on the deadliest attack on London since World War II spurred investors to seek the safety of government debt.
Gains today may be curbed because some analysts, including bond strategist Jason Simpson at ABN Amro Bank NV in London, judge that the attacks won't hamper U.S. economic growth.
`Still Bearish'
``We're still bearish on Treasuries, as even given yesterday's events, we still think the fundamentals are looking good in the U.S.,'' said Simpson. ``Assuming payrolls come in with a good number then this will confirm the U.S. economy is fine.''
The 10-year yield may rise 10 to 20 basis points in the next month, Simpson said.
``You are seeing a stronger U.S. economy,'' said Damien McColough, head of fixed-income research at Westpac Banking Corp. The 10-year yield may rise to 4.2 percent in the next three months, he said.
A group calling itself the al-Qaeda Organization in Europe claimed responsibility for the London attacks, which killed at least 37 people and injured 700 others, and said they were in retaliation for ``the massacres carried out by Britain in Iraq and Afghanistan,'' according to a statement on a Web site.
The last major attack by al-Qaeda was in Madrid, Spain, on March 11, 2004, when 191 people were killed after bombs exploded at four train stations. Yields on 10-year notes fell 3 basis points that day.
`Reaction Similar'
``The initial market reaction yesterday was similar to the reaction we saw directly after the terrorist attacks in Madrid,'' said Jan Lambregts, head of Asia-Pacific research in the treasury department at Rabobank in Singapore. ``The London attacks will still be heavily on the market's mind.''
Signs of faster growth have led traders over the past week to increase bets on the number of times the Fed will raise interest rates in 2005.
Policy makers on June 30 lifted rates for the ninth time in a year, pushing up the target for overnight loans between banks by a quarter percentage point to 3.25 percent.
Yields on December Eurodollar futures were 4.05 percent, up from 3.84 percent a month ago. The futures settle at a three-month lending rate that has averaged 21 basis points more than the Fed's target over the past 10 years.
