Treasuries rose, pushing 10-year note yields to almost a two-week low in an abbreviated trading session, amid concern that Hurricane Sandy will disrupt business and hurt the U.S. economic recovery. Trading in bonds will be closed tomorrow.
Trading volume slowed to a 10-month low as the Securities Industry and Financial Markets Association recommended trading in dollar-denominated fixed-income securities end at noon in New York because of the storm. Treasuries were also supported on speculation that Greece will need to restructure its debt, and before a report this week that economists predict will show the U.S. jobless rate climbed in October. The Federal Reserve postponed its open market operations until Oct. 31.
“Most eyes are on the hurricane and as such volume is half the normal amount,” said David Ader, head of U.S. government bond strategy at CRT Capital Group LLC in Stamford, Connecticut. “The same European stories and uncertainty brought us a little lower in yield overnight, and those stories and the uncertainty persists. There was nothing in the data that we didn’t know coming into today.”
The U.S. 10-year yield fell three basis points, or 0.03 percentage point, to 1.72 percent at 12 p.m. in New York, the lowest since Oct. 16, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 rose 7/32, or $2.19 per $1,000 face amount, to 99 5/32.
Treasury volume reported by ICAP Plc, the largest inter-dealer broker of U.S. government debt, fell to $81.79 billion, the lowest volume since December 2011, from $243.96 billion on Oct. 26 in New York. The volume was nearly of third of the yearly average of $242.5 billion a day in 2012.
Citigroup Inc. and Goldman Sachs Group Inc. are among Wall Street firms that shifted operations to other cities and told staff to work from home as Hurricane Sandy forced evacuations in New York.
The U.S. Treasury Department sold $25 billion in four-week bills at a high discount rate of 0.13 percent. The bid-to-cover ratio, which gauges demand by comparing the amount bid with the amount offered, was 5.23, the highest since January.
The Treasury also sold $32 billion of three-month bills at a rate of 0.125 percent and $28 billion of six-month securities at 0.160 percent.
The Fed will resume operations on Oct. 31. The central bank sold $7.8 billion of Treasuries due from November 2015 through December 2015 today. The sales are part of the Fed’s program to replace short-term debt in its portfolio with longer-term Treasuries in an effort to keep borrowing costs low.
U.S. consumer household purchases, which account for about 70 percent of the economy, rose 0.8 percent, the most since February, after a 0.5 percent gain the prior month, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg survey of 71 economists called for a 0.6 percent rise. Incomes rose 0.4 percent, the most since March.
The jobless rate climbed to 7.9 percent this month from a three-year low of 7.8 percent in September, according to a Bloomberg News survey of economists before the Nov. 2 report. Employers hired 125,000 workers, following an increase of 114,000 in September, according to another Bloomberg survey.
“Despite Sandy’s dislocation of the market the employment number is still in the back of people’s mind as well as the uncertainty of the elections, the fiscal cliff, Europe and all the usual suspects, which means Treasuries will remain well bid for the next several weeks,” said Adrian Miller, a fixed-income strategist at GMP Securities LLC in New York, said in a telephone interview. “Bond market buying at this point is all about insurance, not value.”
Treasuries rose on Oct. 26, sending the 10-year yield down eight basis points, after a report showed Spain’s unemployment rate climbed to a record 25.02 percent, fueling demand for the relative safety of U.S. debt.
The European Commission, the European Central Bank and the International Monetary Fund proposed a restructuring of Greek debt that would require public-sector lenders to take losses, Spiegel reported without saying there it got the information.
From Treasuries to mortgage securities to corporate bonds, returns on U.S. fixed-income assets have averaged 6.5 percent throughout President Barack Obama’s term, exceeding the 4.6 percent during the previous four years under George W. Bush, according to Bank of America Merrill Lynch indexes. Yields on America’s fixed-income assets are seven basis points less than the global average, compared with 51 basis points more back then, the data shows.
Treasuries gained 1.7 percent in 2012 through last week, the Bank of America Merrill Lynch figures show. The MSCI All-Country World Index returned 13 percent, according to data compiled by