Bloomberg News

Treasuries Recoup Loss as Asia Stocks Fall, Europe Plan Stalls

October 20, 2011

Oct. 20 (Bloomberg) -- Treasuries erased a decline as Asian stocks fell after France and Germany failed to resolve a dispute over how to end the region’s debt crisis.

U.S. 10-year yields were about half a percentage point away from a record low as European policy makers disagreed over how heavily they can rely on their central bank to support a bailout fund for countries. The extra yield investors demand to buy 10- year Treasuries instead of two-year notes has narrowed to 1.88 percentage points from this year’s high of 2.91 percentage points in February, according to data compiled by Bloomberg.

“There is still a flight to quality, very clearly,” said Zeal Yin, a money manager at Taipei-based Shin Kong Life Insurance Co., Taiwan’s second-largest life insurer with the equivalent of $39.7 billion in assets. “The problem is not solved” in Europe, he said.

Benchmark 10-year rates declined one basis point, or 0.01 percentage point, to 2.15 percent as of 6:34 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2.125 percent security due in August 2021 changed hands at 99 25/32.

The record low was 1.67 percent on Sept. 23.

The MSCI Asia Pacific Index of shares slid 1.9 percent, erasing a gain from yesterday.

Shin Kong Life increased its Treasury holdings this month, favoring 10- and 30-year maturities, Yin said.

--Editors: Jonathan Annells, Rocky Swift

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; 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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