Treasuries Rise on Bets Central Banks Will Buy More Assets
http://www.bloomberg.com/apps/news?pid=20601009&sid=ayrIUABzchMk&refer=bond#
By Susanne Walker and Dakin Campbell
March 5 (Bloomberg) -- Treasuries rose on speculation central banks may increase asset purchases after the Bank of England said it would buy debt.
“We’re up in sympathy with their announcement that they were going to buy intermediate and longer-term gilts,” said
Jeffry Feigenwinter, head of Treasury trading at BNP Paribas Securities Corp. in New York, one of the 16 primary dealers that trade with the Federal Reserve.
The 10-year note yield fell four basis points, or 0.04 percentage point, to 2.94 percent at 7:56 a.m. in New York, according to BGCantor Market Data. The price of the 2.75 percent security due in February 2019 rose 10/32, or $3.13 per $1,000 face amount, to 98 3/8.
The Bank of England reduced the benchmark interest rate to the lowest ever and said it would start purchasing 75 billion pounds ($105 billion) in assets, printing money to fight the recession.
The Treasury Department will probably announce today that it will sell a record $33 billion of three-year notes on March 10, $17 billion of 10-year debt the following day and $10 billion of 30-year bonds on March 12, according to Wrightson ICAP LLC, a research unit of the world’s largest inter-dealer broker. The auctions follow $94 billion of note sales last week.
President
Barack Obama’s administration is seeking congressional approval for a budget of $3.55 trillion for the fiscal year beginning in October. His spending plans for the year that ends Sept. 30 would result in a record $1.75 trillion deficit.
Supply ‘a Factor’
“Supply is still in the picture and is a factor that’s causing significant concessions in the market,” said
Sean Maloney, a fixed-income strategist at Nomura International Plc in London. “The market may struggle to gain traction.”
The government is relying on overseas investors to help fund programs aimed at turning around an economy that “deteriorated further” in the past two months, according to the Fed’s regional business survey.
China is the largest foreign holder of Treasuries, with $696.2 billion, followed by Japan, with $578.3 billion.
U.S. debt fell earlier after China said it will “significantly increase” investment to counter a slowdown in the world’s third-biggest economy, eroding demand for the safest assets. Premier
Wen Jiabao reiterated China’s 2009 growth target of 8 percent in a report to the National People’s Congress in Beijing today.
Government reports today and tomorrow are forecast by economists to show the U.S. labor market is deteriorating.
Jobs Data
The number of people receiving jobless benefits rose to a record 5.16 million, according to the median estimate in a Bloomberg News survey of economists before the Labor Department releases the figures today. The U.S. lost jobs for a 14th month in February, a separate survey showed before the Labor Department’s payroll report tomorrow.
U.S. 10-year note yields will fall below 2 percent as the recession deepens, said
Mike Turner, the head of strategy and allocation in Edinburgh at Aberdeen Asset Management Plc. A Bloomberg survey of economists projects the yield will drop to 2.64 percent by June 30, with the most recent forecasts given the heaviest weightings.
“Deflation remains a predominant risk,” Turner wrote in a February report distributed today. Deflation, a general drop in prices, enhances the value of a bond’s fixed payments.
U.S. consumer prices were unchanged in the 12 months ended Jan. 31, the Labor Department said Feb. 20, which shows bond investors aren’t losing anything to inflation.
Inflation Outlook
The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or
TIPS, which reflects the outlook among traders for consumer prices climbed to 0.94 percentage point from 0.09 percentage point on Dec. 31. The figure has averaged 2 percentage points over the past two years.
Treasuries handed investors a loss of 3.6 percent in the first two months of 2009, the steepest decline since dropping 4.8 percent between May 2003 and the end of July 2003, according to Merrill Lynch & Co.’s U.S. Treasury Master index. Treasuries gained almost 14 percent in 2008, the best return in 13 years.
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