Bloomberg News

Treasuries Head for Weekly Gain as Gross Sees Risks to Economy

January 12, 2012

Jan. 13 (Bloomberg) -- Treasuries headed for a weekly gain as Bill Gross, who runs the world’s biggest bond fund, said the global economy is at risk and U.S. government debt is a haven.

Benchmark 10-year yields were 26 basis points away from the record low as Europe’s fiscal crisis drove investors to seek the safest assets. European Central Bank President Mario Draghi said his strategy for battling Europe’s debt crisis is working.

“Treasury yields will head lower,” said Akira Takei, head of the international fixed-income department at Mizuho Asset Management Co. in Tokyo, which oversees about $43 billion. “Europe is already in recession, which is resulting in risk aversion.”

U.S. 10-year yields were little changed at 1.93 percent as of 9:50 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security maturing in November 2021 changed hands at 100 21/32. The record low was 1.67 percent set Sept. 23.

Yields have declined three basis points, or 0.03 percentage point, this week.

“For the moment, the U.S. Treasury is viewed as a safe haven,” Gross said yesterday in a Bloomberg Television interview with Trish Regan. “Until we see some clear evidence in terms of where the world is going, reflation or deflation, then that’s a decent alternative. It allows you to get your money back.”

The $244 billion Total Return Fund run by Gross increased its holdings of U.S. government debt in December to the highest level in 13 months, according to the Newport Beach, California, company’s website.

Treasury 30-year bonds fell yesterday as the government’s sale of $13 billion of the securities met lower-than-average demand, after record-setting auctions the prior two days.

The 30-year bid-to-cover ratio, which gauges demand comparing total bids with the amount of securities offered, was 2.6, versus an average of 2.7 for the previous 10 sales.

A 10-year auction Jan. 11 set a lowest-ever yield, and a three-year sale Jan. 10 drew a record high bid-to-cover ratio. Treasuries also fell yesterday as Spain and Italy sold debt at lower borrowing costs.

--With assistance from Trish Regan, Susanne Walker and Cordell Eddings in New York. Editors: Naoto Hosoda, Garfield Reynolds

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

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


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