Bloomberg News

Treasuries Close to Record Lows on European Debt Concern

June 05, 2012

U.S. Stocks Rebound as Treasury Yields Rise From Record Lows

Traders work at the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

Yields on Treasuries were close to record lows as Spanish Budget Minister Cristobal Montoro called for European funds to be used to shore up the nation’s banks, adding to concern the European debt crisis is worsening.

U.S. government securities had recouped earlier losses after European retail sales fell more in April than economists forecast and German factory orders declined.

“This kind of movement is very likely to continue,” said Kei Katayama, who invests in U.S. government debt in Tokyo at Daiwa SB Investments Ltd., which has the equivalent of $63.3 billion and is a unit of Japan’s second-largest brokerage. “The euro region is having a bad effect on the U.S. economy. It’s weaker than many people thought.”

The benchmark 10-year yield rose one basis point, or 0.01 percentage point, to 1.54 percent at 7:35 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent note maturing in May 2022 fell 3/32, or 94 cents per $1,000 face amount, to 101 31/32. The yield reached a record low of 1.4387 percent on June 1.

Treasuries closed at 3 p.m. Tokyo time and were shut during London market hours in observance of Queen Elizabeth II’s Diamond Jubilee, according to the New York-based Securities Industry and Financial Markets Association.

Treasuries have surged 3.7 percent since the end of the first quarter through yesterday, according to Bank of America Merrill Lynch indexes. The MSCI All-Country World Index of stocks lost 12 percent including dividends.

U.S. yields tumbled to records on June 1 after the Labor Department reported the economy added 69,000 jobs in May, less than half the figure projected by a Bloomberg News survey of economists.

‘Bad Effect’

The Institute for Supply Management’s U.S. non- manufacturing index, which covers almost 90 percent of the economy, held at 53.5 in May from April, according to the median forecast of economists surveyed by Bloomberg News before the report today.

The central bank is replacing $400 billion of shorter-term debt in its holdings with longer maturities to support the economy by keeping borrowing costs down. The Fed plans to buy as much as $5.5 billion of Treasuries maturing from August 2020 to May 2022 today, according to the Fed Bank of New York’s website.

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

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


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