Bloomberg News

Treasuries Set for Second Weekly Loss on Greek Agreement

February 09, 2012

Feb. 10 (Bloomberg) -- Treasuries headed for a second weekly loss after Greece announced a deal on austerity measures required to secure a second bailout package, sapping demand for the safety of U.S. government securities.

Thirty-year yields were near a three-month high after the sale of $16 billion of the debt was met with lower-than-average demand yesterday. The yield on the 10-year note held near the highest level in two weeks after applications for jobless benefits in the U.S. unexpectedly fell, adding to signs the world’s largest economy is gaining momentum.

“We are seeing positive sentiment come out of Greece, which is a positive for risk assets and is contributing to the weakness in Treasuries,” said Eric Van Nostrand, an interest- rate strategist at Credit Suisse Group AG in New York, one of the 21 primary dealers that are required to bid at the auctions.

The benchmark 10-year yield was little changed at 2.02 percent as of 12:01 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent note due February 2022 changed hands at 99 26/32. The rate reached 2.07 percent yesterday, the highest since Jan. 24.

The yield on the 30-year bond was 3.17 percent. It reached 3.23 percent yesterday, the most since Oct. 31.

Greek Agreement

Greece’s government reached a deal on austerity measures to secure a 130 billion-euro ($173 billion) rescue, according to an e-mailed statement from the Greek prime minister’s press office. The accord must be ratified by parliament before euro-area finance ministers approve the aid package, Luxembourg Prime Minister Jean-Claude Juncker said in Brussels yesterday.

“The Greek Parliament will convene to vote on an agreement on the private sector involvement, bank recapitalization and authority for the prime minister and finance minister to sign the new memorandum at the weekend,” Pasok socialist party spokesman Christos Protopapas told reporters yesterday.

The U.S. 30-year bonds sold yesterday drew a yield of 3.240 percent, compared with an average forecast of 3.231 percent in a Bloomberg News survey of nine of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.47, compared with 2.6 at the January offering and an average of 2.66 for the previous 10 sales.

Thirty-year bonds have lost 5.4 percent this year after returning 35.5 percent last year, more than triple the 9.8 percent gain by the broader Treasury market, according to Bank of America Merrill Lynch indexes.

U.S. Economy

Applications for U.S. jobless benefits decreased 15,000 in the week ended Feb. 4 to 358,000, Labor Department figures showed yesterday. The median estimate in a Bloomberg survey was for 370,000 claims.

Federal Reserve Chairman Ben S. Bernanke said Feb. 7 the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market.

Investor demand for higher-yielding assets will prove to be “temporary,” said Hiromasa Nakamura, a senior investor in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $43.2 billion. “I don’t think the U.S. economy is gaining momentum. Housing prices are falling and the job market isn’t that strong.”

Ten-year rates will decline to 1.5 percent by June, said Nakamura, who predicted last year’s decline in yields.

Japan’s 10-year rate was unchanged today at 0.985 percent, rising from 0.95 percent at the end of last week.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. boosted holding of Treasuries last month.

Gross increased the proportion of U.S. government and Treasury debt in Pimco’s $250.5 billion Total Return Fund in January to 38 percent from 30 percent in December, according to a report on the company’s website. He raised mortgages to 50 percent, the highest since June 2009, from 48 percent in December. Newport Beach, California-based Pimco doesn’t comment directly on monthly changes in its portfolio holdings.

--With assistance from Cordell Eddings and Daniel Kruger in New York. Editors: Jonathan Annells, Rocky Swift

To contact the reporters on this story: Mariko Ishikawa in Tokyo at Wes Goodman in Singapore at;

To contact the editor responsible for this story: Rocky Swift at

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