BlackRock Says Long-Term Treasuries Entice Amid Low Global Rates

  • U.S. yields rise even as IMF cuts its global growth forecast
  • France said to plan auction of 50-year sovereign bonds

Treasuries’ higher yields relative to debt of other developed nations make them more appealing at a time when low and negative global rates are forcing investors to buy longer-dated securities, according to BlackRock Inc.

The U.S. 30-year bond yield rose four basis points to 2.60 percent Tuesday in New York. That compares with 30-year sovereign yields of 0.87 percent in Germany and 0.40 percent in Japan. France, where 30-year debt yields 1.50 percent, is said to be planning a sale of 50-year bonds to take advantage of low long-term borrowing rates.

"We prefer the longer end of the curve here in the U.S. because you get much, much higher yields than what you can get there in Europe," Jeffrey Rosenberg, New York-based chief investment strategist for fixed income at BlackRock, which manages $4.65 trillion, said in an interview with Bloomberg Television. "It makes the attraction of U.S. long interest rates, when viewed in a global context, much more attractive."

Yields around the world have plunged amid concern that global economic growth is slowing and as inflation remains anemic. The International Monetary Fund on Tuesday cut its world expansion forecast and warned of global stagnation. To combat these problems, central banks in Europe and Japan have implemented negative short-term lending rates, weighing on bond yields. At the same time, the Federal Reserve is trying to tighten policy amid signs the U.S. economy is improving.

IMF Outlook

U.S. debt fell for a third day as crude prices surged to a four-month high. Benchmark Treasury 10-year yields rose five basis points, or 0.05 percentage point, to 1.78 percent as of 5 p.m. New York time, extending a rebound from the lowest since February, according to Bloomberg Bond Trader data. The 1.625 percent security due in February 2026 fell 14/32, or $4.38 per $1,000 face amount, to 98 21/32.

German 10-year bund yields added five basis points to 0.17 percent, while yields on similar-maturity U.K. gilts increased five basis points to 1.44 percent.

The world economy will grow 3.2 percent this year, down from a projected 3.4 percent in January, the IMF said in a quarterly update to its World Economic Outlook. It also cut its 2016 U.S. growth forecast to 2.4 percent, from 2.6 percent.

Fed Caution

Two more Fed officials on Tuesday argued for caution over the timing of the next rate increase as slower U.S. growth, a stronger dollar and weakness abroad hinder the central bank’s effort to boost inflation. Philadelphia Fed President Patrick Harker and Dallas Fed chief Robert Kaplan’s remarks echoed recent calls for a slow approach to policy tightening by Chair Janet Yellen, New York Fed boss William Dudley and Chicago’s Charles Evans.

The Federal Open Market Committee last month left rates unchanged and lowered its forecasts for 2016 increases to two from four, after liftoff from near zero in December.

Futures contracts indicate traders see about a 51 percent chance that the Fed will raise rates this year, down from a 77 percent probability assigned a month ago. The calculation assumes the effective fed funds rate will average 0.625 percent after the Fed’s next increase.

The U.S. sold $24 billion of three-year notes at a yield of 0.89 percent Tuesday. The Treasury will auction $20 billion of 10-year debt Wednesday and $12 billion of 30-year bonds a day later.

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