U.S. 5-Year Yields Touch Week High on Eased Geopolitical Concern
March 22 (Bloomberg) -- Georg Grodzki, global head of credit research at Legal & General Investment Management, talks about the outlook for European bond markets. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
March 21 (Bloomberg) -- Piers Hillier, chief investment officer at Liverpool Victoria Asset Management, talks about the outlook for Japanese equities and his investment strategy. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
March 17 (Bloomberg) -- Jim Caron, head of global interest-rate strategy at Morgan Stanley, talks about the outlook for the U.S. Treasury market following the Japanese earthquake, ensuing tsunami and nuclear crisis. Caron speaks with Betty Liu and Michael McKee on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Treasury five-year note yields reached a one-week high on eased concern Japan’s nuclear reactor crisis and Libya’s military conflict will threaten the global economic recovery.
Yields rose for a fourth day in the longest stretch of gains in more than a month as operators of the nuclear power plant crippled by Japan’s worst earthquake on record moved closer to restoring power to cooling pumps. U.S. Defense Secretary Robert Gates said the intensity of the military campaign in Libya will ebb soon.
“The subsiding of the acute fears coming from abroad has contributed to the cheapening of Treasuries,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “There are still risks associated with the uncertainty in Japan and questions of what it means for economic growth, which has put a ceiling on how high yields can go for the time being.”
Five-year yields rose one basis point, or 0.01 percentage point, to 2.03 percent at 5:01 p.m. in New York, according to Bloomberg Bond Trader prices. The price of the 2.125 percent security maturing in February 2016 fell 1/32, or 31 cents per $1,000 face amount, to 100 13/32.
The yields earlier increased five basis points to 2.08 percent, the highest level since March 10. Benchmark 10-year note yields were little changed at 3.33 percent.
Japan’s stocks rallied as fears of a nuclear meltdown receded after Tokyo Electric Power Co. said it expects to restore power to parts of the building housing the most damaged nuclear reactors at the Fukushima Dai-Ichi plant.
Allied Irish
Allied Irish Banks Plc, a state-controlled lender, denied speculation it’s planning to miss a bond interest payment as yields on government two-year notes soared.
“Extreme risk aversion has been ebbing since last week,” said Bulent Baygun, head of interest-rate strategy in New York at BNP Paribas SA, one of the 20 primary dealers that trade directly with the Federal Reserve. “The European story is in the background of the rates market right now.”
Dallas Fed President Richard W. Fisher said no additional monetary stimulus will be needed after debt purchases are completed in June.
Fisher, who votes on monetary policy this year, said in a speech in Frankfurt that he would have voted against the Fed’s plan to buy $600 billion of debt if he had a vote last year. The central bank bought today $7.6 billion of debt maturing from September 2016 to February 2018.
Fisher on Stimulus
No additional monetary stimulus is necessary, Fisher said, after the Fed completes its second round of quantitative easing, or QE2, which followed an earlier round of $1.7 trillion of purchases that ended a year ago.
U.S. economic reports this week forecast to show the recovery is gaining momentum encouraged analysts who say Treasuries will fall.
New home sales increased 2.1 percent in February from the previous month, according to the median forecast in a Bloomberg News survey before the Commerce Department’s report tomorrow. Orders for durable goods advanced for a second month, a separate survey showed before the department issues figures March 24.
“Rates should be significantly higher given the improvement in the domestic economic story, but there are a lot of exogenous shocks that are still wearing off,” said Larry Milstein, managing director of government and agency debt trading in New York at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors.
Break-Even Rate
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, a gauge of trader expectations for consumer prices known as the break-even rate, has widened to 2.39 percentage points from 1.91 percentage points six months ago.
The 10-year yield will advance to 3.92 percent by year- end, according to the average forecast in a Bloomberg News survey of banks and securities companies, with the most recent forecasts given the heaviest weightings.
Treasuries rose last week on demand for the relative safety of U.S. government debt as concern Japan’s nuclear crisis may hurt the world’s third-biggest economy and armed conflict in Libya roiled financial markets around the world.
Losses from Japan’s record earthquake and ensuing tsunami may total $200 billion to $300 billion, according to Risk Management Solutions Inc., which advises insurers and is based in Newark, California.
Strikes against Libyan leader Muammar Qaddafi’s forces are consistent with the United Nations Security Council resolution on protecting civilians, Gates said at a press conference in Moscow today.
To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
Rate this Page