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U.S. Yield Is Two Basis Points From The Month’s Low on U.S. Growth Outlook
Q
By Wes Goodman - Jul 11, 2011 10:47 AM GMT+0700

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Treasuries yields were within two basis points of the lowest level in July on speculation a government report this week will show U.S. retail sales failed to grow in June as unemployment rose.

Thirty-day federal funds futures contracts for delivery in December 2012 yielded 0.50 percent, indicating investors expect the Federal Reserve will wait until then to raise interest rates. The yield has declined from 1 percent in May as traders bet the central bank will postpone increasing borrowing costs. Concern that Europe’s debt crisis will spread to Italy helped drive demand for the relative safety of U.S. debt.

“There is room for yields to go down,” said Masazumi Fukuoka, chief dealer at the Singapore branch of Mitsubishi UFJ Trust & Banking Corp., which is part of Japan’s largest lender. “The American economy is not so good.”

U.S. 10-year rates were 3.03 percent as of 12:22 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 3.125 percent note due in May 2021 traded at 100 27/32. The rate was 3.01 percent earlier today, the lowest level since June 28.

Fukuoka said he hopes to buy 10-year notes at a yield of 3.10 percent and predicts the rate will fall to 2.65 percent by Sept. 30.

Japan’s 10-year yield dropped 2.5 basis points to 1.15 percent, the biggest decline in three weeks. The government plans to sell a total of 300 billion yen ($3.72 billion) of 20- and 30-year bonds today to increase liquidity in those securities.

Italy Bailout?

The euro slid for a second day after Die Welt reported yesterday that the European Central Bank is seeking to expand an aid fund to include help for Italy. The 17-nation currency slid 0.4 percent to $1.4208. Concern that Greece may default on its debt helped drive Treasuries to a 2.44 percent return in the second quarter, the most in a year, based on Bank of America Merrill Lynch data.

Sales at U.S. retailers were probably unchanged in June from the month before, after declining 0.2 percent in May, according to the median forecast in a Bloomberg News survey of economists before the Commerce Department reports the figure on July 14. A government report the next day will show the cost of living decreased, according to the surveys.

China’s economy probably grew 9.3 percent last quarter, the least in almost two years, contributing to a global weakening, according to economists surveyed before the government’s July 13 report.
Fewer Jobs Added

U.S. 10-year yields dropped 11 basis points, or 0.11 percentage point, on July 8 after a Labor Department report showed the U.S. added fewer jobs than economists expected.

Treasuries trimmed initial gains today as investors prepared for three auctions.

The U.S. plans to sell $32 billion of three-year notes tomorrow, $21 billion of 10-year debt on July 13 and $13 billion of 30-year bonds on July 14. The sizes are unchanged from the last time the U.S. auctioned these securities in June.

The Fed plans to purchase $2.5 billion to $3.5 billion of Treasuries due from July 2015 to December 2016 today, according to its website, as part of its effort to support the economy by investing the principal payments from its debt holdings in government securities.
Less Bearish

Investors became less bearish on their outlook for U.S. government bonds through year-end, according to a survey of money managers by Ried Thunberg ICAP Inc., the New Jersey-based unit of the world’s largest interdealer broker. The company’s sentiment index climbed to 43 for the seven days ended July 8 from 41 the week before. A figure less than 50 indicates investors expect prices to fall.

The Fed may keep interest rates at record lows for the longest period since World War II as the economic slowdown that sparked a four-month bond rally worsens, according to Treasury market signals.

The 3 percentage point gap between yields for three-month and 10-year Treasuries indicates the economy may grow 1.1 percent in the 12 months ending June 2012, a study by the Federal Reserve Bank of Cleveland says. That’s less than half the central bank’s current forecast, and may delay any rate increase from the zero-to-25 basis point range held since 2008.

Slower expansion means the Fed is unlikely to tighten credit until June 2012, the longest static period since the government forced the central bank to buy Treasuries during the 1940s. Any spending cuts agreed by President Barack Obama and Congress before the Aug. 2 deadline to raise the $14.3 trillion debt limit may restrain the economy.

“No one is looking for very spectacular growth,” said Krishna Memani, director of fixed income at OppenheimerFunds Inc. in New York, who helps manage $70 billion. The chance of the Fed lifting borrowing costs “is significantly lower today than it was six months ago,” Memani said. “Growth expectations in the U.S. and global growth expectations are probably lower and more realistic.”

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
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U.S. Yield Is Two Basis Points From The Month’s Low on U.S. Growth Outlook
Q
By Wes Goodman - Jul 11, 2011 10:47 AM GMT+0700

inShare
More
Print
Email

Treasuries yields were within two basis points of the lowest level in July on speculation a government report this week will show U.S. retail sales failed to grow in June as unemployment rose.

Thirty-day federal funds futures contracts for delivery in December 2012 yielded 0.50 percent, indicating investors expect the Federal Reserve will wait until then to raise interest rates. The yield has declined from 1 percent in May as traders bet the central bank will postpone increasing borrowing costs. Concern that Europe’s debt crisis will spread to Italy helped drive demand for the relative safety of U.S. debt.

“There is room for yields to go down,” said Masazumi Fukuoka, chief dealer at the Singapore branch of Mitsubishi UFJ Trust & Banking Corp., which is part of Japan’s largest lender. “The American economy is not so good.”

U.S. 10-year rates were 3.03 percent as of 12:22 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 3.125 percent note due in May 2021 traded at 100 27/32. The rate was 3.01 percent earlier today, the lowest level since June 28.

Fukuoka said he hopes to buy 10-year notes at a yield of 3.10 percent and predicts the rate will fall to 2.65 percent by Sept. 30.

Japan’s 10-year yield dropped 2.5 basis points to 1.15 percent, the biggest decline in three weeks. The government plans to sell a total of 300 billion yen ($3.72 billion) of 20- and 30-year bonds today to increase liquidity in those securities.

Italy Bailout?

The euro slid for a second day after Die Welt reported yesterday that the European Central Bank is seeking to expand an aid fund to include help for Italy. The 17-nation currency slid 0.4 percent to $1.4208. Concern that Greece may default on its debt helped drive Treasuries to a 2.44 percent return in the second quarter, the most in a year, based on Bank of America Merrill Lynch data.

Sales at U.S. retailers were probably unchanged in June from the month before, after declining 0.2 percent in May, according to the median forecast in a Bloomberg News survey of economists before the Commerce Department reports the figure on July 14. A government report the next day will show the cost of living decreased, according to the surveys.

China’s economy probably grew 9.3 percent last quarter, the least in almost two years, contributing to a global weakening, according to economists surveyed before the government’s July 13 report.
Fewer Jobs Added

U.S. 10-year yields dropped 11 basis points, or 0.11 percentage point, on July 8 after a Labor Department report showed the U.S. added fewer jobs than economists expected.

Treasuries trimmed initial gains today as investors prepared for three auctions.

The U.S. plans to sell $32 billion of three-year notes tomorrow, $21 billion of 10-year debt on July 13 and $13 billion of 30-year bonds on July 14. The sizes are unchanged from the last time the U.S. auctioned these securities in June.

The Fed plans to purchase $2.5 billion to $3.5 billion of Treasuries due from July 2015 to December 2016 today, according to its website, as part of its effort to support the economy by investing the principal payments from its debt holdings in government securities.
Less Bearish

Investors became less bearish on their outlook for U.S. government bonds through year-end, according to a survey of money managers by Ried Thunberg ICAP Inc., the New Jersey-based unit of the world’s largest interdealer broker. The company’s sentiment index climbed to 43 for the seven days ended July 8 from 41 the week before. A figure less than 50 indicates investors expect prices to fall.

The Fed may keep interest rates at record lows for the longest period since World War II as the economic slowdown that sparked a four-month bond rally worsens, according to Treasury market signals.

The 3 percentage point gap between yields for three-month and 10-year Treasuries indicates the economy may grow 1.1 percent in the 12 months ending June 2012, a study by the Federal Reserve Bank of Cleveland says. That’s less than half the central bank’s current forecast, and may delay any rate increase from the zero-to-25 basis point range held since 2008.

Slower expansion means the Fed is unlikely to tighten credit until June 2012, the longest static period since the government forced the central bank to buy Treasuries during the 1940s. Any spending cuts agreed by President Barack Obama and Congress before the Aug. 2 deadline to raise the $14.3 trillion debt limit may restrain the economy.

“No one is looking for very spectacular growth,” said Krishna Memani, director of fixed income at OppenheimerFunds Inc. in New York, who helps manage $70 billion. The chance of the Fed lifting borrowing costs “is significantly lower today than it was six months ago,” Memani said. “Growth expectations in the U.S. and global growth expectations are probably lower and more realistic.”

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
Want to save this for later? Add it to your Queue!

inShare
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Print
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Bonds

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