BLBG: Treasuries Head for Weekly Loss as Analysts Raise Forecasts for Payrolls
Treasuries headed for their steepest weekly loss in almost a month as economists said a report will show the U.S. added jobs in December for a third month.
U.S. bonds have fallen 3.2 percent since Nov. 5, when the Labor Department announced employment increased in October to break a four-month string of declines. Today’s report will also show the U.S. unemployment rate was more than 9 percent for a 20th month, giving the Federal Reserve reason to keep adding money to the banking system, economists said.
“The U.S. is in good shape this year,” said Hideo Shimomura, who helps oversee the equivalent of $72 billion in Tokyo as chief fund investor at Mitsubishi UFJ Asset Management Co., a unit of Japan’s biggest bank. “Jobs have started to improve. We sold in November.”
Ten-year notes yielded 3.41 percent as of 2:23 p.m. in Tokyo, according to BGCantor Market Data. The 2.625 percent security maturing in November 2020 traded at a price of 93 15/32.
Yields climbed 12 basis points, or 0.12 percentage point, this week, the most since the period ended Dec. 10.
The rate will reach 4 percent in April or May, Shimomura said. Investors who bought today would sustain a 3.8 percent loss after accounting for reinvested interest if yields reach that level by April 29, according to data compiled by Bloomberg.
The dollar climbed to a two-week high of 83.50 yen before the jobs report.
Forecast Revision
Analysts are raising their jobs forecasts after an industry a report this week showed the biggest jump in company payrolls since records began in 2001. The median forecast in the Bloomberg News survey calls for a 150,000 gain last month, up from 135,000 earlier this week.
Dollar General Corp., the biggest of the U.S. dollar discount stores, plans to add 6,000 jobs, it said Jan. 3.
Investors including Ferguson Wellman Capital Management Inc. in Portland, Oregon, and Fukoku Mutual Life Insurance Co. in Tokyo said they are betting corporate bonds will outperform government debt as the economy improves.
Company debt sales in the U.S. surged to the most on record this week.
Issuance soared to $48.2 billion, eclipsing the $46.9 billion raised in the week ended May 8, 2009, as General Electric Co.’s finance unit sold $6 billion of notes in the largest sale in 11 months, according to data compiled by Bloomberg.
An index of corporate bonds yields 1.62 percentage points more than Treasuries, narrowing to the least since May, Bank of America Merrill Lynch index data show.
Treasuries returned 5.9 percent in 2010, versus 9.5 percent for the company-debt index, the indexes show.
Fed Purchases
The Fed is scheduled to buy $6 billion to $8 billion of notes due from July 2013 to December 2014 today as part of its plan to spur the economy, according to the central bank website.
Fed policy makers said improvements in the data haven’t met the threshold for scaling back their plans to purchase $600 billion in bonds, in minutes of their Dec. 14 policy meeting released Jan. 4 in Washington.
The central bank may extend its purchases after this round of buying ends in June, and that will spell gains for Treasuries, said Hiromasa Nakamura at Mizuho Asset Management Co.
“The Fed is still concerned about employment,” said Nakamura, who helps manage the equivalent of $36 billion as a senior investor at Mizuho in Tokyo. “They will keep buying. We forecast yields will decline. The U.S. is our favorite market” for government bonds.
Ten-year rates will fall to 2.8 percent by March 31, he said.
Republican Statement
Republicans in the U.S. Congress told President Barack Obama and Democrats they won’t agree to raise the government’s debt limit unless specific limits are set on spending.
Any increase must be “accompanied by meaningful action by the president and Congress to cut spending and end the job- killing spending binge,” House Speaker John Boehner said in a statement yesterday after the Obama administration asked Congress to boost the debt ceiling by March 31.
Yields indicate traders are adding to bets on inflation.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2.40 percentage points. It was 2.42 percentage points in Jan. 5, the most since April.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
