Bloomberg News

Three-, Five-Year Treasuries to Advance Further, Barclays Says

January 12, 2012

Jan. 12 (Bloomberg) -- Investors should buy Treasuries maturing in three-to-five years because the Federal Reserve may maintain monetary easing for longer than initially indicated, Barclays Plc said.

Fed officials will start publishing their own forecasts for the central bank’s benchmark interest rate, according to minutes from a December meeting of Federal Open Market Committee released on Jan. 3. The U.S. central bank said in August that it will keep the federal-funds target rate in a range of zero to 0.25 percent at least through mid-2013.

“Were the forecasts to show the Fed on hold until mid-2014, three-year and five-year yields could decline another 10 basis points and 15 basis points, respectively,” Anshul Pradhan and Vivek Shukla, strategists at Barclays, wrote in a note to clients yesterday. “We therefore maintain our long three- to five-year Treasuries view.”

The three-year Treasury yield was at 0.35 percent today. It reached 0.27 percent in September, the lowest on record going back to 1962, according to data compiled by Bloomberg. The five- year rate stood at 0.83 percent, seven basis points from the all-time low reached in September.

A long position is a bet that a security will increase in value. Barclays is one of the 21 primary dealers that trade directly with the Fed.

--Editors: Garfield Reynolds, Jonathan Annells

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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