Bloomberg News

Treasuries Maintain Three-Day Gain Amid Concern Over Greek Aid

February 14, 2012

Feb. 15 (Bloomberg) -- Treasuries maintained a three-day advance as concern that Greece is struggling to secure a second bailout package supported demand for the relative safety of U.S. government debt.

Ten-year yields were two basis points away from the lowest level in a week before the Federal Reserve today releases minutes of its last meeting when policy makers decided to extend the central bank’s pledge to keep borrowing costs low until at least late 2014. Atlanta Fed President Dennis Lockhart said the slow pace of improvement in the labor market warrants low interest rates even as the economy shows signs of strengthening.

“Treasuries are getting a safety bid because there’s still uncertainty in Europe,” said Hajime Nagata, an investor in Tokyo at Diam Co., which manages the equivalent of $128.8 billion and is a unit of Dai-Ichi Life Insurance Company Ltd., Japan’s second-biggest life insurer. “The Fed’s stance also doesn’t allow yields to rise easily.”

The yield on the 10-year note was little changed from yesterday at 1.94 percent as of 10:15 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due February 2022 changed hands at 100 17/32.

The 10-year rate fell as low as 1.92 percent yesterday, the least since Feb. 7, having dropped from this month’s high of 2.07 percent on Feb. 9.

Euro-area finance ministers canceled a meeting scheduled for today in Brussels and will hold a teleconference instead to prod Greece to do more to clinch an aid package worth 130 billion euros ($171 billion) along with about 100 billion euros of debt relief from private bondholders. Greece needs the aid to make a 14.5 billion-euro bond payment on March 20.

Fed’s Pledge

Lockhart, who votes on monetary policy this year, supported the Federal Open Market Committee’s pledge on Jan. 25 to keep the target interest rate exceptionally low at least through late 2014. The Fed also for the first time released policy makers’ forecasts for the timing of an increase in the benchmark interest rate.

Chairman Ben S. Bernanke said in a press conference after the FOMC meeting that the Fed is considering buying more bonds. The central bank has engaged in two rounds of asset purchases totaling $2.3 trillion to stimulate the economy. It also cut the main interest rate close to zero in December 2008.

“The recent economic news has been encouraging, but in my view we haven’t seen enough sustained improvement to be sure it will last,” Lockhart said yesterday in a speech in Sarasota, Florida. “The current policy stance is appropriate for an outlook of steady, moderate growth with gradual employment gains.”

Japan’s benchmark 10-year yield slid one basis point to 0.95 percent today.

--Editors: Benjamin Purvis, Jonathan Annells

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net;

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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