Treasuries Snap Gain Before 3-, 10-, 30-Year Auctions

Treasuries snapped a rally on concern yields that slid to a four-week low will curb demand as investors bid for $66 billion of notes and bonds starting today.

Ten-year notes yielded negative 85 basis points after accounting for consumer prices, the biggest difference in almost a month. Yields are becoming less attractive just as the U.S. prepares to sell $32 billion of 3-year notes today, $21 billion of 10-year debt tomorrow and $13 billion of 30-year bonds on April 12. A government report today will probably show wholesale inventories rose for a fifth month in February, according to a Bloomberg News survey of economists.

Ten-year notes yielded 2.05 percent as of 1:03 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent note due in February 2022 was little changed at 99 17/32, halting a four-day advance. The yield was as low as 2.02 percent yesterday, the least since March 12.

“Yields approaching 2 percent are expensive,” said Youngsung Kim, the head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor. “The U.S. economy is pretty good. I’m bearish” on Treasuries, he said. Samsung Asset is avoiding the securities for now, Kim said.

U.S. wholesale inventories rose 0.5 percent in February, quickening from January’s 0.4 percent gain, the median estimate of the Bloomberg survey shows before the Commerce Department reports the figure.

Japan’s 10-year rate was little changed at 0.965 percent.

BOJ, China Surplus

The Bank of Japan left its benchmark interest rate in a range of zero to 0.1 percent and stimulus programs unchanged. China reported a $5.35 billion trade surplus for March, whereas analysts surveyed by Bloomberg had expected a deficit.

Treasuries rose yesterday as investors sought the safety of U.S. debt on concern the global recovery is slowing.

Fed Chairman Ben S. Bernanke said the economy has yet to recover, in a speech yesterday in Stone Mountain, Georgia.

“About three and a half years have passed since the darkest days of the financial crisis, but our economy is still far from having fully recovered from its effects,” Bernanke said.

U.S. yields tumbled April 6 when a Labor Department report showed jobs growth fell short of forecasts in March, spurring speculation the Fed will be more inclined to initiate a third round of asset purchases, known as quantitative easing.

Narrower TIPS Spread

The difference between 10-year yields on conventional U.S. government securities and Treasury Inflation-Protected Securities narrowed to 2.20 percentage points on April 6, the smallest spread since March 7. The gap is a projection of the rate of inflation during the life of the securities.

The Fed is scheduled to buy as much as $2 billion of Treasuries due from February 2036 to February 2042 today. It also plans to purchase as much as $5 billion of government securities maturing from April 2018 to February 2020, according to the Fed bank of New York website.

The central bank is replacing $400 billion of shorter-term debt in its holdings with longer maturities to hold down borrowing costs.

The Bollinger band technical indicator showed the decline in 10-year yields is set to stop.

Yields as low as 2.046 percent today approached the so-called lower Bollinger level of 2.04 percent. Bollinger bands gauge volatility by plotting standard deviations above and below a moving average. Analysts use them to determine a probable range for a rate or security.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE