Treasuries Snap Gain on Bets Fed to Refrain New Stimulus

Treasuries stayed lower following a decline yesterday before the U.S. announces today the sizes of 3-, 10-, and 30-year auctions scheduled for next week.

The government will probably sell $32 billion of 3-year notes, $24 billion of 10-year securities and $16 billion of the so-called long bonds over three days starting May 8, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey. Treasuries fell yesterday after an industry report showed U.S. manufacturing unexpectedly gained in April.

U.S. 10-year rates were little changed at 1.95 percent as of 9:40 a.m. in Tokyo, according to Bloomberg Bond Trader data. The 2 percent security due in February 2022 changed hands at 100 14/32. The 10-year yield slid to a record low of 1.67 percent Sept. 23. The average over the past decade is 3.83 percent.

“To argue that the bond market is suggesting optimism on the economy, with 10-year yields below 2 percent, is a little tough,” said Justin Hoogendoorn, a fixed-income strategist at Bank of Montreal (BMO) unit BMO Capital Markets in Chicago. He said the reaction to the manufacturing data showed “at the margin, there’s a little optimism.”

The Institute for Supply Management’s factory index rose to 54.8 in April from 53.4 a month earlier, the Tempe, Arizona- based group’s report showed. Readings greater than 50 signal growth, and the median forecast of economists surveyed by Bloomberg News called for a decline to 53.

Maturing Debt

There will be $36.7 billion of Treasury securities maturing and available for reinvestment next week, and the sales will raise $35.3 billion of new cash, according to Wrightson.

The U.S. may also announce plans to sell floating-rate securities, Mary Miller, the Treasury Department’s undersecretary for domestic finance, said Feb. 1.

Payrolls rose by 161,000 in April after a 120,000 gain in March, while the jobless rate stayed at 8.2 percent, according to economist forecasts before the Labor Department report May 4.

Three voting members of the Federal Open Market Committee said they don’t see a need to ease policy further as the U.S. economy maintains its expansion.

Federal Reserve Bank of Richmond President Jeffrey Lacker said in Washington that more monetary stimulus risks stoking inflation while doing little to strengthen the recovery. San Francisco’s John Williams said the outlook he expects doesn’t warrant more bond buying, and Atlanta’s Dennis Lockhart repeated that he’s skeptical of the benefits of such action.

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net.

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

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