U.S. 30-Year Bond Rises as Sale Draws Lower Than Forecast Yield
March 11, 2010, 1:20 PM ESTBy Susanne Walker and Cordell Eddingsstrq
March 11 (Bloomberg) -- Treasuries rose after the U.S. sold $13 billion of 30-year debt, the final of three note and bond auctions this week totaling $74 billion. The difference in yield between 2- and 30-year debt was near the highest on record.
“We are at a yield that should attract investors,” said David Ader, the head of government bond strategy at Stamford, Connecticut-based CRT Capital Group LLC, before the auction. “We are close to the cheapest levels that we’ve been in two and a half years.”
The yield on the 30-year bond fell 3 basis points to 4.66 percent at 1:03 p.m. in New York, according to BGCantor Market Data. The yield earlier was 3.80 percentage points more than that of the 2-year note, after increasing to 3.85 percentage points on Feb. 17, the widest since at least 1980, according to data compiled by Bloomberg.
Indirect bidders, an investor class that includes foreign central banks, bought 23.9 percent of the bonds at today’s auction. They purchased 28.5 percent of the bonds at the February sale and 40.7 percent at the January offering. The average for the past 10 auctions is 41.47 percent.
Bid-to-Cover
Today’s offering follows a record-tying $40 billion sale of three-year notes on March 9 and a $21 billion sale of 10-year notes yesterday. At that auction, investors bid for 3.45 times the available debt, the highest on record for a 10-year offering.
Indirect bidders bought 35.1 percent of the 10-year securities sold, compared with an average of 40.3 percent at the past 10 auctions.
Stocks declined, with the Standard & Poor’s 500 Index slumping 0.3 percent as higher-than-estimated inflation in China spurred speculation the nation will be forced to raise interest rates and the U.S. trade deficit unexpectedly narrowed.
Dollar’s Advance
The dollar strengthened against most major currencies as the drop in U.S. imports raised concern that global growth may slow, diminishing the appeal of higher-yielding assets.
The trade gap decreased 6.6 percent to $37.3 billion from a revised $39.9 billion in December as Americans imported the fewest barrels of crude oil in a decade, Commerce Department figures showed today in Washington. Exports decreased 0.3 percent, the first decline since April. Labor Department data showed initial claims for U.S. jobless benefits fell by 6,000 to 462,000 last week.
“If you look behind the trade numbers, exports and imports both fell,” said Kathy Lien, director of currency research at the online foreign-exchange trader GFT Forex in New York. “The contraction in imports and exports does not play into the growth story. That’s why risk currencies are selling off and the dollar is rising.”
Breakeven Rate
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, a gauge of expectations for gains in consumer prices known as the breakeven rate, widened for an eighth day, increasing to 2.26 percentage points, from 2.18 a week ago. The average over the past five years is 2.16 percentage points.
Treasuries have made investors 1.4 percent this year, trailing a 2.1 percent return on German securities, according to Bank of America Merrill Lynch indexes.
--Editors: Dennis Fitzgerald, Greg Storey
To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
