Bloomberg News

Treasuries Fall for Sixth Day as Stocks Rise Before Fed Minutes

October 12, 2011

Oct. 12 (Bloomberg) -- Treasuries fell for a sixth day, with 30-year bonds extending their losing streak to the longest in four years, as stocks rallied amid speculation reports this week will ease concern the U.S. is headed for a recession.

Thirty-year yields climbed to the highest in three weeks as Treasury Secretary Timothy F. Geithner said European leaders recognize they need to step up efforts to resolve the sovereign debt crisis. Economists predict a report on Oct. 14 will show U.S. retail sales increased in September by the most in six months. The Federal Reserve is due to release minutes of its last meeting. Ten-year notes dropped before a sale of $21 billion of the securities.

“We’ve had a bit of an uptick in terms of economic data, so there’s an increasing pricing out of the double dip, which has been feared for a while,” said Orlando Green, a fixed- income strategist at Credit Agricole Corporate & Investment Bank in London. “We’ve seen yields go higher as a result.”

The 30-year yield climbed eight basis points, or 0.08 percentage point, to 3.18 percent at 7:26 a.m. in New York, after reaching 3.19 percent, the most since Sept. 21. The yield hasn’t risen for six days since the period through May 18, 2007. The 3.75 percent bond due August 2041 fell 1 5/8, or $16.25 per $1,000 face amount, to 110 29/32. The 10-year yield rose six basis points to 2.21 percent.

U.S. Payrolls

Thirty-year yields have advanced 23 basis points since Oct. 6, the day before a Labor Department report showed U.S. payrolls jumped more than economists predicted in September. Analysts are projecting a 0.7 percent gain in retail sales for September, a Bloomberg survey shows. Confidence among U.S. consumers rose this month, a University of Michigan survey will show the same day, according to a separate survey.

Fed policy makers kept the federal funds target rate for overnight interbank loans in a range of zero to 0.25 percent at their Sept. 20-21 meeting. The central bank said it will buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less.

The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, widened to 2.05 percentage points yesterday, the most in a month, signaling investors are increasing wagers that consumer-price increases will accelerate as the economy recovers.

Quarterly Gain

Demand for the safety of U.S. debt pushed Treasuries up 6.4 percent in the third quarter, the most since the U.S. economy was in a recession in the final three months of 2008, Bank of America Merrill Lynch indexes show. They lost 1 percent this month, recording a similar loss to German bunds, perceived to be Europe’s safest government securities, the indexes show.

Bunds dropped today as bids at a sale of 30-year debt missed the maximum amount on offer and euro-region industrial production rose. The 30-year yield increased nine basis points to 2.90 percent.

The Stoxx Europe 600 Index and Standard & Poor’s 500 Index futures expiring in December both rose 0.9 percent.

“The most important problem is they have to make sure that the major economies of Europe that are under pressure now are able to borrow at affordable rates,” Geithner said yesterday in an interview with Bloomberg Television. “They recognize the need to do more than they’ve done so far.”

There’s a good chance of averting a European calamity, Economic and Monetary Affairs Commissioner Olli Rehn said. In a pre-recorded speech to a Dublin conference today, he said consensus on resolving Europe’s debt crisis is in the making.

The 10-year securities scheduled for sale today yielded a record 2 percent the last time the notes were auctioned on Sept. 13. The government plans to sell $13 billion of 30-year bonds tomorrow, following a $32 billion three-year auction yesterday.

--With assistance from Wes Goodman in Singapore and Joe Brennan in Dublin. Editors: Mark McCord, Nicholas Reynolds

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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