Treasury Futures Head for Biggest Weekly Gain Since November

Treasury futures contracts headed for the biggest weekly gain since November as investors speculated whether the U.S. economy will quicken enough for the Federal Reserve to end its bond purchases in 2014.

A report Jan. 10 will probably show the unemployment rate held at a five-year low of 7 percent, based on a Bloomberg News survey of banks and securities companies. Economists said U.S. growth will slow after surging to 4.1 percent in the third quarter of last year, which was the most since the final three months of 2011. Federal Reserve Chairman Ben S. Bernanke is scheduled to speak in Philadelphia later today.

“For the first quarter, yields will go down a little,” said Allen Lei, a Treasuries trader in Taipei at Hontai Life Insurance Co., which oversees the equivalent of $6.2 billion. “I don’t think the economy will be as strong.”

Treasury 10-year futures contracts for March delivery gained 6/32, or $1.88 per $1,000 face amount, this week. They were little changed today at 123 6/32 as of 11:24 a.m. in Singapore, based on electronic trading at the Chicago Board of Trade.

This week’s advance is the most since the period ended Nov. 15. Futures plunged more than 4 points over the final two months of last year.

Trading of U.S. bills, notes and bonds is closed in Japan for a holiday. Ten-year yields rose to 3.05 percent yesterday, the highest level since July 2011.

Bernanke is scheduled to address the American Economic Association today, four weeks before his term expires on Jan. 31.

U.S. employers probably added 193,000 workers in December, versus 203,000 in November, economists in a Bloomberg survey forecast before the Jan. 10 report. An unemployment rate of 7 percent would match the lowest level since November 2008.

Growth Prospects

Economic growth was probably 1.5 percent in the fourth quarter of 2013 and will be 2.6 percent in the first three months of 2014, according to a Bloomberg survey of economists.

U.S. government securities slid 3.4 percent in 2013, the first annual decline since 2009’s record 3.7 percent loss, Bank of America Merrill Lynch data show.

The losses have further to go in 2014, said Park Sungjin, who oversees $7 billion as head of asset management at Meritz Securities Co. in Seoul.

“Yields will rise,” he said. “Tapering will impact the market.” Park said he would like to set a position against Treasuries if yields fall to about 2.9 percent or 2.8 percent.

Tapering Purchases

The Fed said Dec. 18 it will cut its monthly bond purchases to $75 billion from $85 billion starting in January.

The central bank will pare its buying by $10 billion in each of its next meetings before ending the program late this year as the economy strengthens and joblessness decreases, based on the median forecast of 41 economists surveyed by Bloomberg on Dec. 19.

The difference between yields on 10-year notes and same-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, widened to 2.25 percentage points yesterday, a level not seen since September. The average over the past decade is 2.22 percentage points.

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