BLBG: Treasury 10-Year Yields Near Mid-Range Before Employment Report
By Susanne Walker and Anna Rascouet
Feb. 2 (Bloomberg) -- Treasury 10-year note yields traded near the middle of a range they’ve been in since May before a report this week forecast to show the U.S. added the most jobs last month in two years, signaling the economy is strengthening.
Yields on the benchmark note were steady before the U.S. announces tomorrow how much it will sell in auctions of 3-, 10- and 30-year securities next week. Former Federal Reserve Chairman Paul Volcker is scheduled to testify today before a Senate committee on a proposal to limit the size and trading activities of banks.
“The market is focused on economic releases later in the week and the Treasury supply announcements tomorrow,” said Ray Remy, head of fixed income in New York at Daiwa Securities Group Inc., one of 18 primary dealers that trade directly with the central bank.
The yield on the 10-year note fell one basis point, or 0.01 percentage point, to 3.64 percent at 10:19 a.m. in New York, according to BGCantor Market Data. The 3.375 percent security due in November 2019 rose 2/32, or 63 cents per $1,000 face amount, to 97 25/32. It has traded between 3.07 percent and 4.0 percent since May 1.
“The bond market feels like it’s in the midst of its own ‘Groundhog Week’ as we hold our collective breath for the non- farm payroll verdict,” William O’Donnell, U.S. government bond strategist at primary dealer RBS Securities Inc. in Stamford, Connecticut. The non-farm payroll number “may determine the path of rates in the coming weeks.” In the 1993 film “Groundhog Day,” the central character kept reliving the same day.
Gain in Jobs
The U.S. economy gained 8,000 jobs in January, according to the median forecast of 78 economists in a Bloomberg News survey. The Labor Department is due to report the data on Feb. 5. It added 4,000 jobs in November 2009, the first increase since December 2007.
The Treasury will announce tomorrow the size of its auctions of 3-, 10- and 30-year debt on Feb. 9, 10 and 11, respectively.
U.S. securities returned 1.6 percent in January, the most since March, according to Bank of America Merrill Lynch.
Government bond yields dropped on Jan. 21 to the lowest level in a month when President Barack Obama announced the bank proposal, under which commercial banks would be prohibited from owning hedge funds and limited in how much they could trade.
Volcker is scheduled to testify before the Senate Banking Committee at a hearing that begins at 2:30 p.m. Washington time.
The number of contracts to buy previously owned U.S. homes was little changed in December, gaining 1 percent after a record plunge a month earlier, a National Association of Realtors report showed today. The data matched the forecast in a Bloomberg News survey.
Credit Losses
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 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.
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 2.38 percentage points, up six basis points since the end of last week.
U.S. stocks rose, with the Standard & Poor’s 500 Index gaining 0.5 percent.
To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Anna Rascouet in London at arascouet@bloomberg.net
