Treasuries Futures at 2-Week High as Market Set to Reopen

Treasury futures traded at almost a two-week high as cash bond markets prepared to reopen tomorrow after closing due to the risk posed by tropical cyclone Sandy.

Trading volumes slowed before the Securities Industry and Financial Markets Association recommended the market in dollar-denominated fixed-income securities in the U.S reopen after being shut since Monday noon. A report showed a gauge of U.S. house prices climbed by the most in more than two years in the 12 months ended in August.

“The hurricane is a marginally negative for risk markets, and that provides a marginal bid for safe assets,” said Andy Richman, who oversees $12 billion as a director of fixed-income in West Palm Beach, Florida, for SunTrust Bank’s wealth and investment management division. “The economy is getting slightly better, but we still have slow growth and plenty of headwinds from Europe to the fiscal cliff that are keeping uncertainty in the market and a bid for safety.”

Ten-year contracts for December delivery traded at 132 22/32 at 5 p.m. New York time after rising to 133 2/32, the highest level since Oct. 16. The 10-year Treasury note yield was at 1.72 percent at yesterday’s close.

Trading volume was 348,127 contracts yesterday, compared with a daily average of 854,650 contracts this month through Oct. 26, according to data compiled by Bloomberg.

Ten-year futures contracts climbed from 131 1/8 at the end of last year and are down from a record-high 135 1/2 reached on July 25, the data showed.

Pimco’s View

Andrew Balls, London-based head of European portfolio management at Pacific Investment Management Co., which runs the world’s biggest bond fund, said he favors the five- to 10-year part of the Treasury yield curve on bets the Federal Reserve will continue to support the economy through stimulus measures.

The S&P/Case-Shiller index of property values in 20 cities rose 2 percent from August 2011, the biggest year-to-year gain since July 2010, after rising 1.2 percent in the year to July, the group said today in New York. The median forecast of 25 economists in a Bloomberg survey projected a 1.9 percent gain.

CME said trading of interest-rate futures and options including Treasuries, Eurodollar and Federal funds products will resume normal trading hours, including remaining open today on both the floor and the Globex platform.

Sandy, now termed a post-tropical cyclone, drove floodwaters to life-threatening levels, cut power to about 8 million customers and stopped the U.S. presidential race eight days before Election Day. President Barack Obama and Republican challenger Mitt Romney are tied among likely voters in the latest national poll by the Pew Research Center.

Fiscal Cliff

Lawmakers in the Republican and Democratic parties are seeking to avoid the so-called fiscal cliff, the more than $600 billion of federal spending cuts and tax increases that will automatically take effect at the start of next year unless Congress acts.

“The potential for disappointment and concern around these fiscal issues means that we could see a short-term rally in Treasuries,” Pimco’s Balls said on Bloomberg Television’s “The Pulse” with Francine Lacqua. “Our strategy is to look for income in the five- to 10-year part of the curve. We think the Fed will continue to support the market.”

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