Dec. 2 (Bloomberg) -- Treasuries headed for their steepest weekly loss since October before a government report today that economists said will show U.S. jobs growth quickened last month, confirming a pickup in the world’s largest economy.
The difference between rates on 10-year notes and inflation-indexed securities, a gauge of expectations for consumer prices over the life of the debt, widened to 2.11 percentage points yesterday, the most in two weeks. The five- year average is 2.04 percentage points. James Bullard, president of the Federal Reserve Bank of St. Louis, said recent reports point to stronger growth and the central bank shouldn’t rush to ease monetary policy further.
“The current yield level is too low given the growth outlook,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third-largest publicly traded bank by assets. “Yields are likely to rise gradually as we continue to see good numbers in the U.S. economy.”
Benchmark 10-year yields were little changed at 2.09 percent as of 10:53 a.m. Tokyo, according to Bloomberg Bond Trader prices. The 2 percent note due in November 2021 changed hands at 99 6/32. The rate reached 2.14 percent yesterday, the highest since Nov. 14, and it has advanced 13 basis points this week, the most since the five-day period ended Oct. 14.
The yield will advance to 2.18 percent by year-end, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings. Shimazu predicts 2.3 percent.
The U.S. added 125,000 jobs in November, compared with 80,000 in October, the Labor Department will say today, according to the median estimate in a Bloomberg News survey of economists. The jobless rate probably held at 9 percent, based on the responses.
U.S. manufacturing expanded in November at the fastest pace in five months, the Institute for Supply Management in Tempe, Arizona, reported yesterday. The New York-based Conference Board said last month that its index of consumer confidence rose in November by the most since April 2003.
This week’s decline wasn’t enough to knock Treasuries from their place as one of the best-performing bond markets this year, with the gain driven by demand for the relative safety of American securities during Europe’s debt crisis.
Treasuries due in 10 years and more have returned 20 percent in the past six months, the most among 144 bond indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Benchmark 10-year yields are within about 45 basis points of the record low of 1.67 percent set Sept. 23.
Flowing to Treasuries
“Money is flowing from the euro to Treasuries,” said Yoshiyuki Suzuki, who helps oversee the equivalent of $70.7 billion as the Tokyo-based head of fixed income at Fukoku Mutual Life Insurance Co. “The upside in yields will be limited.”
Fed officials are debating whether the central bank should resume large-scale purchases of securities to push down an unemployment rate that has been stuck at 9 percent or higher since April.
“The data have come in stronger than expected, so I think the logical thing now is to wait and see,” Bullard said in an interview in New York yesterday at the Bloomberg Hedge Fund Conference hosted by Bloomberg Link. “See if we continue to get a good read on the holiday season and start out the New Year stronger or weaker, and also assess the situation in Europe and see how that feeds back to the United States.”
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