Treasury Yields Reach Six-Week Low, U.S. Stocks Retreat

Treasuries rose as investors bet the Federal Reserve will keep buying debt as it awaits a pick-up in economic growth, while U.S. stocks fell for a fourth day amid concern lawmakers will fail to reach a budget deal to avoid a government shutdown. The dollar gained and metals slid.

Ten-year Treasury rates decreased for a third straight day, losing five basis points to a six-week low 2.65 percent. The yield on benchmark 10-year German government bonds lost seven basis points to 1.85 percent. The Standard & Poor’s 500 Index slipped 0.3 percent to 1,697.42 and has fallen 1.6 percent in four sessions. The U.S. dollar gained against 14 of 16 major peers, while nickel, copper and aluminum lost more than 1 percent and oil fell for a fourth day.

Senate Democrats offered a new proposal that funds the government through Nov. 15, complicating efforts to avoid a shutdown in a week as Republican Senator Ted Cruz began an extended speech in opposition to funding for the health-care law. An index of U.S. consumer confidence slumped in September to a four-month low, while home prices in 20 U.S. cities rose in the 12 months through July by the most in more than seven years.

“Momentum remains relatively constructive in the Treasury market in the wake of the Fed’s decision not to taper,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The market is grinding a little bit higher.”

The Federal Open Market Committee said after its Sept. 17-18 meeting that it wants more evidence of an economic recovery before paring its $85 billion of monthly asset purchases, surprising economists who had forecast a reduction.

Fed Views

Fed members offered different views on central bank stimulus. New York Fed President William C. Dudley said yesterday the U.S. economy “still needs the support of a very accommodative monetary policy,” while his Atlanta counterpart Dennis Lockhart said policy should focus on creating a more dynamic economy after a recent cooling in growth.

Twenty-four of 41 economists surveyed by Bloomberg News on Sept. 18-19 said the Fed will wait until December before taking the first step in slowing its bond-buying.

Growing concern over the outlook for hiring and wages shook U.S. consumer sentiment this month, raising the risk spending will contribute less to growth. The Conference Board’s consumer confidence index declined to 79.7, the weakest since May, from 81.8 a month earlier. The Richmond Fed’s manufacturing index dropped to 0 from 14.

Budget Debate

Investors are also watching the debate in Washington over spending cuts. Hardening positions on the federal budget and borrowing limit, and recent political setbacks suffered by both President Barack Obama and Republican congressional leaders as they go into the fight, are raising the odds of a government shutdown, debt default or near-miss that could roil markets.

The two-year Treasury note yield was little changed at 0.33 percent, within three basis points above the lowest level in six weeks, after the U.S. sale of $34 billion in two-year notes was met with weaker-than-forecast yield.

The S&P 500 has advanced 5.7 percent in the current quarter, and is up 19 percent for the year. Seven of the 10 main S&P 500 industry groups declined today as telephone and consumer-staples companies led losses.

Applied Materials Inc. surged 9.1 percent after the largest supplier of chipmaking equipment agreed to buy Tokyo Electron Ltd. Red Hat Inc. slumped 12 percent after second-quarter billings at the largest seller of the Linux operating system trailed estimates.

Homebuilders Gain

The S&P Supercomposite Homebuilding Index rose 2.3 percent, with all its 11 members gaining. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent from July 2012, matching the median projection of 31 economists surveyed by Bloomberg and the biggest year-to-year advance since February 2006, a report from the group showed today in New York. Lennar, the third-largest U.S. homebuilder by revenue, rose 4.3 percent after earnings topped analysts’ estimates.

The Bloomberg U.S. Dollar Index, a gauge of the currency against 10 major peers, rose 0.2 percent. The euro weakened 0.2 percent to $1.3473. New Zealand’s kiwi weakened 1.2 percent to 82.71 U.S. cents.

European Markets

The Stoxx Europe 600 Index added 0.2 percent. The index has surged 9.9 percent since the end of June, on pace for the biggest quarterly gain in four years. Telecom Italia SpA rose 1.7 percent today after Telefonica SA agreed to increase its stake in the Italian phone company.

Germany’s Ifo business climate index climbed less than predicted in September. The gauge, which polls executives in Europe’s largest economy, rose to 107.7 from 107.5 in August. Economists in a Bloomberg survey had forecast a reading of 108.

Copper for three-month delivery on the London Metal Exchange fell 1.4 percent to $7,147 a metric ton. Nickel declined 1.4 percent to $13,750 a ton and zinc dropped 1.1 percent to $1,875 a ton, as all six main industrial metals traded on the LME retreated. Gold futures fell 0.8 percent to $1,316.30 an ounce in New York.

Soybean futures climbed 0.4 percent to $13.1250 a bushel on the Chicago Board of Trade, rallying from a one-month low as demand for U.S. supplies climbed.

The MSCI Emerging Markets Index fell 0.6 percent, paring the quarterly gain to 7.5 percent. Egypt’s benchmark stock index, the EGX 30, added 0.6 percent as a court ordered the banning of the Muslim Brotherhood’s activities and seizure of its assets yesterday. The Egyptian stocks index has rallied 3 percent in four days.

Before it's here, it's on the Bloomberg Terminal.