Bloomberg News

Treasuries Snap Rally Before TIPS Auction, New Home Sales

August 22, 2012

Treasuries snapped a four-day rally before the U.S. sells $14 billion of inflation protected securities today and announces the sizes of three note auctions set for next week.

U.S. securities have handed investors a 0.9 percent loss this month, based on Bank of America Merrill Lynch data, following a report Aug. 3 that showed better-than-predicted jobs growth. New home sales may have rebounded in July, a Bloomberg News analyst survey indicated before Commerce Department data today. Many Federal Reserve policy makers said more stimulus will probably be needed soon unless the economy shows signs of a durable pickup, minutes of their last meeting showed yesterday.

Ten-year Treasury yields increased one basis point to 1.70 percent as of 11:45 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 slid 2/32, or 63 cents per $1,000 face amount, to 99 9/32. The yield yesterday dropped 11 basis points, or 0.11 percentage point, after the Fed report. It was the biggest slide since May 30.

“It’s no longer nearly as attractive as it was a few days ago,” said Andy Cossor, a Hong Kong-based market strategist at DZ Bank AG, Germany’s fourth-largest lender.

Japan’s benchmark 10-year rate fell one basis point to 0.81 percent, dropping for a third day.

Debt Auctions

Five-year Treasury Inflation Protected Securities yielded negative 1.22 percent, compared with negative 1.08 percent at the last auction of the securities on April 19, which was a record low.

Investors bid for 2.58 times the amount of debt offered four months ago, versus the average of 2.64 for the past 10 sales.

Indirect bidders, the investor class that includes foreign central banks, bought 36 percent of the securities, the least in two years.

The U.S. will probably sell $35 billion of two-year debt on Aug. 28, the same amount of five-year notes the following day and $29 billion of seven-year securities on Aug. 30, according to Wrightson ICAP LLC, an economic advisory company based in Jersey City, New Jersey.

Maturing Treasuries available for reinvestment will total $50.4 billion, and the auctions will raise $48.6 billion of new cash, according to Wrightson. The government issues the combination of two-, five- and seven-year notes every month.

The Fed yesterday released records of its July 31-Aug. 1 policy meeting. The Federal Open Market Committee’s next gathering is scheduled for Sept. 12-13.

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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