U.S. 10-year notes rose for the first time in four days as the world’s largest economy shows signs of slowing amid speculation Bank of Japan stimulus measures would drive investors into Treasuries, boosting demand for U.S. government debt.
The benchmark yields fell ahead of a report tomorrow forecast to show U.S. retail sales stagnated in March after gaining 1.1 percent in February. Yields briefly rose after the U.S. sale of $13 billion in 30-year bonds produced a lower-than-forecast yield and as stocks touched new highs. Economists are cutting their forecasts for how much Treasury 10-year yields will rise this year. The economy is forecast to grow by 2 percent in 2013, down from 2.2 percent last year.
“Global central banks are really driving the push for safety,” said Larry Milstein, managing director in New York of government-debt trading at R.W. Pressprich & Co. “The economic numbers have slowed down, the Fed is still buying aggressively and the prospect that Japanese easing may also push flows into Treasuries means more money flowing into Treasuries.”
Benchmark 10-year yields fell one basis point, or 0.01 percentage point, to 1.79 percent at 5 p.m. New York time, based on Bloomberg Bond Trader prices. The 2 percent note due February 2023 rose 3/32, or 94 cents per $1,000 face amount, to 101 27/32. Current 30-year bond yields fell one basis point to 3 percent.
Ten-year yields will be 2.25 percent by Dec. 31, according to banks and securities companies surveyed by Bloomberg News, down from 2.32 percent projected in February.
The Standard & Poor’s 500 Index rose a fourth day, gaining 0.4 percent to 1,593.37 after touching a record 1,597.35.
The 30-year bonds sold today drew a yield of 2.998 percent, compared with a forecast of 3.001 percent in a Bloomberg News survey of seven of the Federal Reserve’s primary dealers.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.49, versus a 2.59 average for the previous 10 sales.
Indirect bidders, an investor class that includes foreign central banks, purchased 31.4 percent of the notes, the lowest since October, compared with an average of 36.7 percent for the past 10 sales.
Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 19.2 percent of the notes, the highest level since December, compared with a more than three-year low of 4.9 percent in March and an average of 14.7 percent at the last 10 auctions.
“There was no real concession,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “You had this huge run-up last week on a weaker employment number, but you also had all this buying predicated on more foreign buying coming in because of the Bank of Japan and its new quantitative-easing program. A lot of people front-runned that.”
Treasury 10-year yields fell on April 4 after Bank of Japan Governor Haruhiko Kuroda said the central bank would double its asset purchases, to 7.5 trillion yen ($75.8 billion) of bonds a month, in a bid to encourage inflation. Japan held $1.12 trillion of U.S. debt, Treasury data through January shows.
The Federal Open Market Committee, led by Chairman Ben S. Bernanke, is pressing on with $85 billion in monthly bond buying until the labor-market outlook has “improved substantially.” The Fed purchased $3.298 billion in Treasuries today maturing between May 2020 and February 2023.
Labor Department figures released in Washington showed Jobless claims decreased by 42,000 to 346,000 in the week ended April 6, from a revised 388,000. The median forecast of 49 economists surveyed by Bloomberg called for a drop to 360,000.
The plunge in unemployment benefits was credited to an unwinding of a surge caused by the Easter holiday and spring break at schools. A Labor Department official said no states were estimated and there was nothing unusual in the data.
The Commerce Department will report retail figures tomorrow, forecast to stagnate. Employment and manufacturing grew less in March than economists forecast, government and industry reports this month showed.
“Things have slowed down some -- it’s a little bit of an underpinning in the market,” said Tom Tucci, managing director and head of Treasury trading in New York at CIBC World Markets Corp. In terms of retail sales, “people are anticipating a weaker number. In general, it will continue the softening trend.”