Bloomberg News

Treasuries Snap Gain on Speculation Retail Sales Rose

April 15, 2012

Treasuries snapped a gain from last week before a government report that economists said will show U.S. retail sales rose for a 10th month in March.

Treasuries have handed investors a 0.2 percent loss this year as of April 13 as the world’s biggest economy shows signs of improvement, based on Bank of America Merrill Lynch indexes. The Standard & Poor’s 500 Index returned 9.6 percent, according to data compiled by Bloomberg. U.S. government securities revived in April as the European debt crisis increased demand for the safest assets. Treasuries have returned 1.1 percent this month, beating a 2.6 percent loss for the S&P 500.

“The economy is OK,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s third- largest publicly traded bank by assets. A continued recovery is “bad for Treasuries. Investors should put their money in equities as consumer demand grows.”

Benchmark 10-year notes yielded 1.98 percent as of 11:48 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due in February 2022 changed hands at 100 5/32.

Shimazu revised his end-of-June forecast for 10-year yields to 2.3 percent from 2.6 percent.

Retail sales probably rose 0.3 percent last month, after gaining 1.1 percent in February, according to a Bloomberg News survey of economists before the Commerce Department data today. A separate report will show manufacturing in the New York region grew, another survey showed.

Signs of Strengthening

The economy expanded “at a modest to moderate pace” from mid-February through late March as manufacturing, hiring and retail sales showed signs of strengthening, the Federal Reserve said in its Beige Book report on April 11. The central bank has pledged to keep its benchmark interest rate near zero until late 2014 to support the expansion.

The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, has risen to 2.27 percentage points from 1.95 percentage points at the end of last year. The average over the past decade is 2.14 percentage points.

Net purchases of long-term notes, bonds and equities by investors outside the U.S. probably fell to $40 billion in February from $101 billion in January, based on a Bloomberg survey of economists before the Treasury Department reports the figure today.

Officials from Europe will travel to Washington this week seeking a bigger global war chest to combat the region’s debt crisis as Spain’s government battles to quell market turmoil over its finances. The talks will be part of the International Monetary Fund’s meeting in Washington April 20-22.

Spain is scheduled to sell 12- and 18-month bills tomorrow, followed by April 19 auctions of debt due in 2014 and 2022. Yields on the nation’s 10-year notes exceeded 6 percent on April 11, climbing toward the 7 percent level that pushed Greece, Ireland and Portugal into rescues.

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

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


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