Bloomberg News

Treasuries Gain in Longest Rally in Year Amid ECB Purchase Bets

August 24, 2012

Treasuries rose in the longest rally in more than a year as the European Central Bank was said to wait until a Germany court rules on the legality of Europe’s permanent bailout fund before unveiling full details of a plan to buy government bonds.

The yield on the U.S. 10-year note dropped for a sixth day in its longest decline since May 2011 after Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said a Federal Reserve stimulus plan is “almost a done deal.” Treasuries gained on speculation ECB President Mario Draghi may not announce a definitive purchase program at a meeting at the bank’s September meeting.

“There’s a lot of uncertainty and it could go very wrong,” David Ader, head of U.S. government bond strategy at CRT in Stamford, Connecticut, said of the ECB speculation. “All of us were excited to think that on Sept. 6 we would get details of bond-buying plan. There’s a lot of room for disappointment.”

The benchmark 10-year yield dropped three basis points, or 0.03 percentage point, to 1.65 percent at 8:24 a.m. in New York, according to Bloomberg Bond Trader prices. The yield declined 17 basis points this week, the most since the period ended June 1.

With the German court set to rule on Sept. 12, investors looking for Draghi to announce a definitive purchase program at his Sept. 6 press conference might be disappointed, according to the officials, who spoke on condition of anonymity because the deliberations are not public. The program is still being worked on and staff may not be able to finalize it by then, said the officials, who are familiar with thinking on the ECB Governing Council. An ECB spokesman in Frankfurt declined to comment.

To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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


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