Tags: Treasurys | Hope | Rates | 2016

Treasurys Gain on Hopes for Steady Rates into 2016

Tuesday, 14 Jan 2014 08:58 PM

Treasurys are having their best start to a year since 2010 as investors from Jeffrey Gundlach to Goldman Sachs Group Inc. said the Federal Reserve will keep its benchmark interest rate near zero into 2016.

U.S. government debt has returned 0.7 percent in 2014 as of Tuesday, the most for the first two weeks in four years, according to Bank of America Merrill Lynch data. Prices of Treasurys surged after a government report Jan. 10 showed the U.S. economy added 74,000 jobs in December, versus the gain of 197,000 projected by a Bloomberg News survey of economists.

“Investors may be less confident about the economic recovery,” said Kei Katayama, a money manager at Daiwa SB Investments Ltd in Tokyo. The firm oversees the equivalent of $47.3 billion. “For several weeks, we may see yields range-bound or slightly lower.”

Benchmark 10-year yields were little changed at 2.88 percent as of 10:21 a.m. Wednesday in Tokyo, Bloomberg Bond Trader data show. The price of the 2.75 percent note due in November 2023 was 98 29/32. Katayama said the yield will be above 3.5 percent by the end of the year.

Gundlach, whose DoubleLine Total Return Bond Fund beat 83 percent of its competitors over the past year, said short-term interest rates will stay low into 2016. Gundlach, who is based in Los Angeles, is not so sure Treasury yields are headed higher, he said in a webcast Tuesday.

Goldman’s Outlook

Jan Hatzius, the chief economist at Goldman Sachs, said Tuesday there probably won’t be a rate increase until early 2016. The Fed will probably conclude its bond purchase program known as quantitative easing in late 2014, Hatzius said at an event in Frankfurt.

The Fed has kept its target for overnight loans between banks in a range of zero to 0.25 percent for five years.

Treasurys fell Tuesday after Philadelphia Federal Reserve President Charles Plosser said the economy is on “firmer footing” and the central bank’s decision to cut debt purchases was a step in the right direction.

Policy makers in December announced plans to cut their monthly bond purchases to $75 billion a month from $85 billion starting in January.

Treasurys rebounded after securities due in 10 years and longer tumbled 13 percent 2013, the biggest loss among 144 sovereign bond indexes globally compiled by Bloomberg and the European Federation of Financial Analysts Societies.

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Treasurys are having their best start to a year since 2010 as investors from Jeffrey Gundlach to Goldman Sachs Group Inc. said the Federal Reserve will keep its benchmark interest rate near zero into 2016.
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Tuesday, 14 Jan 2014 08:58 PM
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