Treasury Notes Decline as Euro Officials Reach Accord on GreeceSusanne Walker
Treasury notes fell after euro-area finance ministers reached a provisional deal to keep financial aid flowing to Greece for four more months if the nation meets conditions on economic reforms.
Yields on U.S. government securities sank earlier as Germany and its allies had turned up pressure on Greece to accept their conditions to stay in the euro, stoking refuge demand. Stocks gained as investors sought higher-yielding assets after the ministers began meeting in Brussels and speculation increased that an agreement was imminent.
“A positive resolution is a positive for risky assets, and it removes the bid away from Treasuries,” said Gary Pollack, who manages $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. “There’s still a lot of unknowns about Greece and a long-term resolution. This is an immediate reaction to the latest headline.”
Yields on five-year notes rose one basis point, or 0.01 percentage point, to 1.59 percent at 5 p.m. New York time, according to Bloomberg Bond Trader data. They slid earlier to as low as 1.51 percent percent. The yields increased five basis points on the week. The price of the 1.25 percent debt due in January 2020 fell to 98 13/32.
Ten-year note yields were little changed at 2.11 percent after falling seven basis points and rising as much as three basis points. The 30-year bond yielded 2.71 percent, down two basis points.
The Brussels deal on removes the threat of the European Central Bank pulling the plug on Greece’s banks, a prospect that would have risked the nation crashing out of the euro. The accord is designed to buy time to work out the details of longer-term financing.
A list of reform measures from Greece, due on Monday, is subject to validation by the ECB, the International Monetary Fund and the European Commission, the institutions collectively known as the troika, from which Greek Prime Minister Alexis Tsipras had vowed to break free.
Treasuries fell yesterday amid speculation Federal Reserve Chair Janet Yellen will signal to lawmakers in testimony next week that interest rates may still go up this year. Minutes released Wednesday of the Fed’s January meeting showed many policy makers favored keeping the benchmark interest rate at virtually zero “for a longer time” amid slow wage growth and international turmoil. The gathering took place before a report showed wages and payrolls jumped in January.
The U.S. central bank has indicated it will raise borrowing costs as the labor market strengthens, yet it acknowledged in the January minutes that officials saw “the continuing weakness of core inflation measures as a concern.”
“Clearly the Fed wants to raise rates,” said Brian Edmonds, the head of interest-rates trading in New York at Cantor Fitzgerald LP, one of 22 primary dealers that trade with the central bank. “There’s a sense she’ll be more hawkish than the minutes were.”
Overseas demand underpinned Treasuries this year even with the Federal signaling it will raise interest rates.
Hedge-fund managers and other large speculators reversed bets on 30-year bond futures to wager for the first time this year the securities will rise, Commodity Futures Trading Commission data showed. Long positions, or bets prices on the debt will increase, outnumbered short positions by 8,490 contracts as of Feb. 17, from a net-short position of 18,626 a week earlier.
Treasuries also were supported by speculation Denmark was considering capital controls to protect its currency’s peg to the euro. Hans Joergen Whitta-Jacobsen, head of the Danish Economic Council, said by phone he never advised such a move, contradicting a report by Reuters. He said he doesn’t expect controls will be imposed. The council is an independent body of academics known as the “Wise Men.”
An earlier comment to other media on capital movement was “a way of expressing that the central bank would go very far and do whatever it takes” to save the peg, he said.