The Treasury Department is asking investors to buy the worst-performing part of the U.S. government debt market this month in a 30-year auction today.
The bonds have fallen 1.7 percent in February as of yesterday, Bank of America Merrill Lynch indexes show. Ten-year notes dropped 0.7 percent and five-year securities slid 0.2 percent. Shorter maturities are outperforming as the economy improves and the Federal Reserve cuts the purchases of long-term Treasuries it uses to support growth.
“This isn’t the time to buy 30-year bonds,” said Kim Youngsung, the head of fixed income in Seoul at Samsung Asset Management Co. The company is South Korea’s largest private bond investor with the equivalent of $106.3 billion as in assets.
Benchmark U.S. 10-year yields declined one basis point today to 2.77 percent as of 1:26 p.m. in Tokyo, Bloomberg Bond Trader data show. A basis point is 0.01 percentage point. The price of the 2.75 percent note due in February 2024 rose 6/32, or $1.88 per $1,000 face amount, to 99 26/32.
Thirty-year yields slid one basis point to 3.71 percent. The figure was as high as 3.74 percent yesterday, the most in almost three weeks. Investors demanded an extra 3.37 percentage points to hold long bonds instead of two-year notes, versus the average of 2.22 percentage points over the past decade.
Treasuries trimmed losses today before a government report economists said will show retail sales stagnated in January from December.
“I would expect some weak data in terms of retail sales later today, so that should help the 30-year auction,” Ali Jalai, a bond trader in Singapore at Scotiabank, a unit of Bank of Nova Scotia, one of the primary dealers that underwrite the U.S. debt. “The economy is going through a little bit of a soft patch.”
Employment reports for December and January showed job growth was smaller than economists predicted.
Australia’s 10-year borrowing cost dropped four basis points to 4.19 percent, the biggest decline in two weeks. The nation’s jobless rate rose to 6 percent, the highest level since 2003, government data today showed.
Japan’s benchmark 10-year yield was little changed at 0.605 percent, after falling to 0.595 percent earlier this month, which was the lowest level since November.
Today’s 30-year sale, for $16 billion, follows a 10-year auction yesterday and a three-year sale on Feb. 11.
Fed Chair Janet Yellen pledged this week to maintain her predecessor Ben S. Bernanke’s policies by scaling back stimulus in “measured steps.” The central bank has cut its purchases of mortgage debt and long-term Treasuries to $65 billion a month from $85 billion last year.
Yesterday’s auction of 10-year notes drew the largest share since June of bidders from an investor class that includes foreign central banks.
Rising yields helped draw investors to yesterday’s 10-year sale, said Ray Remy, head of fixed income in New York at Daiwa Capital Markets America Inc., which as a primary dealer is obligated to bid in U.S. debt sales.
“It was a great auction,” he said yesterday in New York. “The back-up in yields is the major thing.”
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