Bloomberg News

U.S. 30-Year Yield Below German Bond for First Time Since 2009

November 29, 2011

Nov. 29 (Bloomberg) -- Yields on U.S. 30-year bonds dropped below those on similar maturity German government securities for the first time since May 2009 as European officials struggle to contain the region’s sovereign-debt crisis.

Treasuries fell as finance ministers from the 17-member European monetary union meet in Brussels amid speculation regional officials are struggling to support member nations’ debt markets. Government debt declined earlier after a boost in U.S. consumer sentiment eased concern the U.S. economy may falter.

“The situation in Europe hasn’t really improved, instead it seem to get worse,” said Larry Milstein, managing director in New York of government and agency debt trading at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors. “The European sovereign debt issue is still the biggest issue and that will continue to give Treasuries support.”

The U.S. 30-year bond yields traded as low as 2.92 percent while German 30-year yield reached as high as 2.96 percent, according to Bloomberg Bond Trader prices.

Yields on 30-year bonds rose three basis points, or 0.03 percentage point, to 2.96 percent at 5:05 p.m. New York time. The 3.125 percent securities due in November 2041 fell 18/32, or $5.63 per $1,000 face amount, to 103 10/32.

The Standard & Poor’s 500 Index gained 0.2 percent after adding as much as 0.9 percent.

Total Returns

Treasuries have returned 1.2 percent this month and 9.3 percent in 2011 as of yesterday, according to a Bank of America Merrill Lynch index. German bunds have fallen 0.7 percent on the month and have returned 6.3 percent year-to-date.

The U.S. 10-year yield has traded in a 28-basis-point range during November, with a high of 2.15 percent and a low of 1.87 percent. That compares with a 70-basis-point range the month before, with a high of 2.42 percent and a low of 1.72 percent.

“We’re going to stay in the range of 2.10 to 1.90 until we have more evidence of our own economy either doing better or worse,” said Dan Mulholland, a trader in New York at Royal Bank of Canada’s RBC Capital Markets unit, one of the 21 primary dealers that trade with the Federal Reserve.

The S&P/Case-Shiller index of property values in 20 cities dropped 3.6 percent in September from the same month in 2010 after decreasing 3.8 percent in the year ended August, the group said today in New York. The median forecast of 32 economists in a Bloomberg News survey projected a 3 percent decrease.

Economic Indicators

Consumer confidence climbed in November by the most in more than eight years as Americans grew more upbeat about employment and income prospects.

The Conference Board’s index increased to 56 from a revised 40.9 reading in October, the biggest monthly gain since April 2003, figures from the New York-based private research group showed today. The gauge, at a four-month high, exceeded the most-optimistic forecast in a Bloomberg News survey of economists.

Holiday sales figures and speculation about ECB assistance for Italy “gives people reason to be more confident” about the U.S. economy, said Scott Sherman, an interest-rate strategist at Credit Suisse Group AG in New York, a primary dealer.

Retail sales climbed 16 percent, and shoppers spent $398.62 on average, up from $365.34 a year earlier, according to the National Retail Federation, citing a survey from BIGresearch. Holiday sales account for about 20 percent to 40 percent of retailers’ annual revenue, the National Retail Federation said.

European Plan

Europe’s effort to expand its bailout fund to 1 trillion euros ($1.3 trillion) is falling short, forcing renewed consideration of a role for the European Central Bank in insulating Spain and Italy from the debt crisis, two officials familiar with the discussions said.

Italy sold 3.5 billion euros of a new three-year bond, 2.5 billion euros of 2022 bonds and 1.5 billion euros in 2020 bonds, just shy of the top range of 8 billion euros for the sale. The 2014 note yielded 7.89 percent, the highest since September 1996 for a three-year bond and up from 4.93 percent when similar- maturity debt was sold last month.

Fed Vice Chairman Janet Yellen said the central bank has leeway to spur the U.S. recovery and reduce unemployment by purchasing more assets and clarifying its plan to sustain record-low borrowing costs.

“The scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of longer-term financial assets,” Yellen said in remarks prepared for a conference held at the San Francisco Fed. She said economic growth in the U.S. and other advanced economies “has been proceeding too slowly to provide jobs for millions of unemployed people.”

The U.S. central bank purchased $2.54 billion of Treasuries due from 2036 to 2041 today as part of a plan announced in September to replace $400 billion in shorter maturities with longer-term securities to keep borrowing costs down.

--Editors: Paul Cox, Kenneth Pringle

To contact the reporters on this story: Daniel Kruger in New York dkruger1@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


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