BLBG: Treasury 10-Year Yield Near Three-Week Low as Stocks Decline
By Lukanyo Mnyanda and Wes Goodman
March 4 (Bloomberg) -- Treasury 10-year yields were within 4 basis points of a three-week low as declines in equities and demonstrations against budget cuts in the Greek capital increased demand for the relative safety of U.S. debt.
The yield dropped as much as 3 basis points earlier before a report tomorrow economists say will show the U.S. lost jobs and the unemployment rate increased last month. The MSCI World Index snapped four days of gains, losing 0.2 percent. Demand for higher-yielding assets also waned after Greece’s pledge to deepen spending cuts failed to entice Germany into committing specific financial support. Protesters in Athens seized the finance ministry building and blocked roads.
Bonds are partly driven by “weaker equities, which are losing steam,” said Luca Jellinek, a senior rates strategist in London at ANZ Banking Group Ltd. “On the Greek story, there are still risks. Broadly, there’s very little reason for equity markets to roar ahead.”
The yield on the benchmark 10-year note fell 1 basis point to 3.62 percent as of 9 a.m. in London, according to BGCantor Market Data. Yields declined to 3.58 percent on Feb. 26, the lowest since Feb. 9. The 3.625 percent security due February 2020 climbed 1/32, or 31 cents per $1,000 face amount, to 100 2/32.
MSCI’s Asia Pacific Index of shares declined 0.7 percent, and the Stoxx Europe 600 Index retreated 0.3 percent.
Ten-year yields may fall to 3.2 percent by the end of June, according to Hiromasa Nakamura, a senior investor who helps oversee the equivalent of $21.1 billion in Tokyo at Mizuho Asset Management Co., part of Japan’s second-largest bank by assets.
U.S. Payrolls
U.S. payrolls fell by 65,000 last month after declining 20,000 in January, according to a Bloomberg survey before the Labor Department report tomorrow. The jobless rate rose to 9.8 percent from 9.7 percent, a separate survey showed.
Morgan Stanley Asia Chairman Stephen Roach said the U.S. economic recovery is “crummy.” Consumer spending will only increase modestly as households pay down debt, he said in interview with Bloomberg Television.
The Treasury is scheduled to announce today the size of three-, 10- and 30-year auctions next week. It will probably sell $40 billion of three-year notes on March 9, $21 billion in 10-year debt the following day and $13 billion of 30-year bonds on March 11, according to estimates from Wrightson ICAP LLC, an economic advisory firm in Jersey City, New Jersey.
Not on Agenda
German Chancellor Angela Merkel said financial aid for Greece isn’t on the agenda when she hosts Prime Minister George Papandreou for talks tomorrow, after his government announced 4.8 billion euros ($6.6 billion) of measures to reduce its budget deficit, the biggest in the European Union.
The extra yield, or spread, investors demand to hold Greece’s 10-year securities instead of Treasuries increased 14 basis points to 252 basis points. The spread, which averaged 32 basis points in the past decade, reached 353 basis points on Jan. 28. Greece started selling 10-year bonds in euros today.
Gains by Treasuries may be limited as some other indicators show financial conditions are easing.
An index of corporate bonds around the world yields 1.66 more than benchmark government securities, the least in a month, according to indexes compiled by Bank of America Corp.’s Merrill Lynch unit.
To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.
