Bloomberg News

Treasury 30-Year Yields Rise From Week Low Before Auction

January 12, 2012

Jan. 12 (Bloomberg) -- Treasury 30-year bond yields rose from the lowest levels this week as comments by European Central Bank President Mario Draghi that there are signs the euro-area economy is stabilizing reduced the haven appeal of U.S. debt.

Yields dropped as low as 2.94 percent after a report showed U.S. retail sales increased less than forecast in December and weekly jobless claims rose. Long-bond yields pared their decline as traders prepared for the Treasury’s sale of $13 billion of the securities, the final of three note and bond auctions this week totaling $66 billion.

“Comments by Draghi about stabilization in the European economy and the idea that the ECB will remain accommodative is weighing on Treasuries some and breathing a little life into risk markets -- namely the euro,” said Adrian Miller, fixed- income strategist at Miller Tabak Roberts Securities LLC in New York. “We could see cooler demand at today’s auction given the rally, the slightly better risk outlook and the fact that investors don’t necessarily like 30-year notes under 3 percent.”

Yields on 30-year bonds fell one basis point, or 0.01 percentage point, to 2.95 percent at 12:33 p.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent security due in November 2041 rose 9/32, or $2.81 per $1,000 face amount, to 103 15/32. The yield on the 10-year note increased one basis point to 1.91 percent.

Spain sold 9.98 billion euros ($12.7 billion) of bonds today, twice the maximum target of 5 billion euros set for the sale. The yield on the three-year notes was 3.384 percent, compared with 5.187 percent when the nation sold similar securities in December. Italy sold 12 billion euros of bills at 2.735 percent, down from 5.952 percent at the last auction.

ECB Holds Line

ECB policy makers meeting in Frankfurt kept the benchmark interest rate at a record low 1 percent, as predicted by 47 of 53 economists surveyed by Bloomberg News.

“The market has settled around these levels and is waiting for a real impetus to move one way or the other,” said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, one of 21 primary dealers that are required to bid at the auctions. “It’s hard to love Treasuries here, and you can’t say there is a lot of value unless you expect more bad data going forward. But investors have to hold them given the uncertainty coming from Europe and the lack of alternatives.”

Treasuries earlier rose after sales at U.S. retailers in December rose 0.1 percent, restrained by cheaper fuel prices and holiday discounting that helped hold down the value of goods sold. The gain followed a 0.4 percent advance in November that was more than initially reported, Commerce Department figures showed today. Economists forecast a 0.3 percent December rise, according to the median estimate in a Bloomberg News survey. Purchases excluding automobiles fell 0.2 percent.

Jobless Claims

Jobless claims climbed by 24,000 to 399,000 in the week ended Jan. 7, Labor Department figures showed today in Washington. The median forecast of 46 economists in a Bloomberg News survey projected 375,000. The number of people on unemployment benefit rolls rose, while those receiving extended payments decreased.

The 30-year securities scheduled for sale today yielded 2.96 percent in pre-auction trading, compared with the all-time low of 2.925 percent at the Dec. 14 auction. Investors bid for 3.05 times the amount of debt offered last month, the highest level since August 2000.

‘‘The 30-year poses the greatest risk of this week’s auctions, with results right now a crap shoot,” Justin Lederer, an interest-rate strategist in New York at Cantor Fitzgerald LP, a primary dealer, wrote in a note to clients.

The 10-year debt sale yesterday drew a record low yield of 1.90 percent. A three-year auction on Jan. 10 drew bids for a record 3.73 times the amount offered.

--Editors: Kenneth Pringle, Dennis Fitzgerald

To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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