U.S. Notes Gain for Fifth Week as Citigroup Warns of Recession

  • Citigroup economists says chance of global recession is high
  • Markets are `risk off,' Sumitomo Mitsui Trust's Kuriki says

Treasury 10-year notes headed for a fifth weekly gain, the longest run in 13 months, on concern this year’s financial-market turmoil will slow global economic growth.

The average 10-year yield from the U.S., Japan and Europe -- the world’s three biggest bond markets -- dropped to an all-time low this week. The yield slid to 0.6 percent Thursday, a record in data going back to 1989. The chances of a global recession are high and only going up, according to Citigroup Inc., one of the 22 primary dealers that underwrite U.S. debt.

“Treasuries have been resilient as safe-haven flows linger,” said Nick Stamenkovic, a fixed-income strategist at Edinburgh-based broker RIA Capital Markets Ltd. “With negative yields becoming prevalent in the euro area, Treasuries offer a yield pick-up.”

The benchmark Treasury 10-year note yield rose one basis point, or 0.01 percentage point, to 1.73 percent as of 7:08 a.m. New York time, according to Bloomberg Bond Trader data. The 1.625 percent security due in February 2026 fell 1/8, or $1.25 per $1,000 face amount to 99 2/32. The yield has declined two basis points this week.

The last time the benchmark yield dropped for five straight weeks was the period ended Jan. 30, 2015.

Investors have snapped up bonds this year as the MSCI All Country World Index of shares has fallen 6.5 percent. The measure rose this week even as Chinese shares tumbled.

‘Precarious’ Growth

“Global growth is at a highly precarious point, after 2-3 years of relative calm,” economists led by Willem Buiter wrote in a note for New York-based Citigroup. “Below-potential global growth will likely reinforce disinflationary momentum and global growth could fall to even one percent or lower.”

Citigroup’s Economic Surprise Index this week indicated data in Group-of-10 economies are falling short of analysts’ estimates by the most since April 2013, and a selloff in crude oil and weakening credit markets are exacerbating the malaise.

“Investors are selling equities and other assets and buying safety bonds,” said Hideaki Kuriki, a debt investor in Tokyo at Sumitomo Mitsui Trust Asset Management, which oversees $59.1 billion. It’s “risk off” in the financial markets, he said.

The difference between yields on U.S. 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices, was little changed Friday at 1.40 percentage points. It dropped to 1.12 percentage points on Feb. 11, the lowest since March 2009.