BLBG: Treasuries Little Changed Before Volcker’s Senate Testimony
By Anna Rascouet and Wes Goodman
Feb. 2 (Bloomberg) -- Treasuries were little changed before former Federal Reserve Chairman Paul Volcker’s testimony before a Senate committee on a proposal to limit the size and trading activities of banks.
Bonds fell earlier after DealReporter, citing unidentified lawmakers and staffers, said the plan known as the Volcker rule and supported by President Barack Obama may be either significantly modified or dropped.
“Treasuries are a bit soft,” said Orlando Green, a London-based fixed-income strategist at Calyon, the investment- banking arm of Credit Agricole SA.
The yield on the 30-year bond increased one basis point, or 0.01 percentage point, to 4.57 percent at 7:16 a.m. in New York, according to BGCantor Market Data. The 4.375 percent security due in November 2039 fell 5/32, or $1.56 per $1,000 face amount, to 96 25/32. The 10-year yield was little changed at 3.65 percent.
The MSCI World Index of shares advanced 0.5 percent, rising for a second day and helping erode demand for the relative safety of government securities. Europe’s Dow Jones Stoxx 600 Index climbed 0.4 percent.
DealReporter, part of the Financial Times Group, said in an article that Richard Shelby, a Senate Banking Committee member, opposes the Volcker rule. Jonathan Graffeo, a spokesman for the Alabama Republican senator, said it’s “off the mark” to suggest the proposal is unlikely to move ahead in the Senate.
Shelby’s Stance
Shelby “believes that the Volcker rule requires further examination,” Graffeo said in an e-mailed statement. Volcker is due to testify to the Senate Banking Committee today.
Government bond yields dropped on Jan. 21 to the lowest level in a month when Obama announced the bank proposal, under which commercial banks would be prohibited from owning hedge funds and limited in how much they could trade.
Treasuries returned 1.6 percent in January, the most since March, according to Bank of America Merrill Lynch.
The number of contracts to buy previously owned U.S. homes was probably little changed in December after a record plunge a month earlier, according to the median forecast of 35 economists in a Bloomberg News survey. The report from the National Association of Realtors is due at 10 a.m. New York time.
The financial crisis started with the collapse of the U.S. property market in 2007 and has triggered $1.73 trillion of writedowns and credit losses at banks and other financial institutions, according to data compiled by Bloomberg.
Japan Post Bank
Japan Financial Services Minister Shizuka Kamei is urging Japan Post Bank Co., the government-owned lender and the world’s largest holder of deposits, to diversify its investments into U.S. Treasuries and corporate bonds.
Almost 80 percent of Japan Post Bank’s funds go toward buying domestic government bonds, according to the Financial Times, which reported Kamei’s remarks.
Japan Post had 195.7 trillion yen of assets as of Dec. 31, equivalent to $2.15 trillion, based on figures from the company’s Web site.
Treasuries decreased yesterday, pushing yields on 30-year bonds up by the most in two weeks, after the Institute for Supply Management’s factory index gained and a separate report showed U.S. personal spending rose for a third month, renewing speculation inflation will accelerate.
A government report on Feb. 5 will show the U.S. economy added the most jobs in January since December 2007, according to a Bloomberg survey of economists.
Outlook for Yields
Yields are poised to rise, according to Nikhil Srinivasan, head for Asia at Allianz Investment Management, overseeing $30 billion in the region from his office in Singapore. The company is a unit of Allianz SE, Europe’s largest insurer.
“If things do slow in the U.S., there will be more pressure to spend more money,” he said. “The market will assume an inflationary element to that. My general sense is Treasury yields will go up over the year.”
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, a gauge of trader expectations for consumer prices, was 2.39 percentage points, up 7 basis points since the end of last week.
The U.S. will announce tomorrow the size of its auctions of 3-, 10- and 30-year securities next week.
To contact the reporter on this story: Anna Rascouet in London at arascouet@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net
