- U.S. long-term bonds are best perfomers in 144 debt indexes
- Gains limited by concern oil-producing countries are selling
Treasuries climbed, pushing 10-year yields to the lowest since October, with investors seeking the safety of sovereign debt as the collapse of crude-oil prices sparked anxiety in markets from stocks to inflation derivatives.
U.S. debt rose alongside peers in Europe as declines in commodity and stock prices fueled speculation the Federal Reserve will struggle to meet policy makers’ own forecast for interest-rate increases this year. A bond-market gauge of inflation expectations, known as the 10-year break-even rate, slid to the least since 2009. Treasury trading sessions in Asia and Europe were the busiest since Aug. 24, when a slide in Asian stock markets sparked a U.S. stock-market selloff, according to David Ader, head of rates strategy with CRT Capital Group LLC.
“We’re in panic mode,” said David Keeble, New York-based head of fixed-income strategy at Credit Agricole SA. “It’s very difficult to predict what happens next.”
The benchmark 10-year note yield fell seven basis points, or 0.07 percentage point, to 1.99 percent at 9:03 a.m. New York time, and it earlier touched 1.95 percent, the lowest since Oct. 2, according to Bloomberg Bond Trader data. The 2.25 percent security due in November 2025 rose 19/32, or $5.94 per $1,000 face amount, to 102 10/32.
The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices, narrowed as much as four basis points to 1.35 percentage points, the lowest since April 2009.
U.S. government securities due in 10 years and longer returned 3.4 percent this year through Tuesday, the most of 144 debt indexes tracked by Bloomberg and the European Federation of Financial Analysts Societies.
“With most risky assets under pressure and volatility at its highest level since last September, investors continue to flock to the safety of government bonds,” Russ Koesterich, the global chief investment strategist for New York-based BlackRock Inc., wrote in a report Tuesday. The company is the world’s biggest money manager, with $4.5 trillion in assets.
Treasuries held gains after a report showed the cost of living in the U.S. dropped in December, led by a slump in commodities. The consumer-price index declined 0.1 percent last month, matching the median forecast in a Bloomberg survey of economists, after being little changed in November, a Labor Department report showed Wednesday. Excluding food and fuel, the so-called core index rose 0.1 percent, less than forecast and the smallest gain in four months.
An even bigger Treasuries rally is being held back by investor concern that oil-producing countries are selling assets including holdings of U.S. debt to raise money as crude plunges, said Toshifumi Sugimoto, the chief investment officer at Capital Asset Management in Tokyo. Oil traded close to its lowest level in about 12 years.
“Given this kind of bear news for the stock market, it’s very unusual that U.S. Treasury yields aren’t falling too much,” he said.
The Organization of the Petroleum Exporting Countries reduced its holdings of U.S. government debt by almost 3 percent over the six months through November to $289 billion, according to the latest Treasury Department figures.
For Saudi Arabia, the world’s largest oil producer, its reserve assets have fallen for 10 straight months through November, according to the Saudi Arabian Monetary Agency.
Even so, U.S. 10-year yields have dropped about 29 basis points since the start of the year, on track for the best month since January 2015.