Tags: treasurys | bonds | fed | jobs

Treasurys Among World’s Top Performers on Fed Outlook

Monday, 08 April 2013 07:27 AM

Treasurys were among the world’s best-performing bonds in the past month after a smaller-than-forecast job gain in March indicated the Federal Reserve will keep purchasing debt to spur the economy.

U.S. government securities due in 10 years and longer returned 6.2 percent from a month ago, according to indexes compiled by Bloomberg and the European Federation of Financial Bank of Analysts Societies. That was the third biggest gain across 144 indexes covering bond markets worldwide. Treasury yields show inflation expectations fell to the lowest level since January.

“The slowdown in U.S. employment is giving people reason to buy Treasurys,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-largest publicly traded bank by assets. “It favors continuing the asset-purchase program.”

The U.S. 10-year yield was little changed at 1.73 percent at 8:36 a.m. London time, according to Bloomberg Bond Trader prices. The 2 percent note maturing in February 2023 traded at 102 1/2. The yield fell to 1.68 percent on April 5, the lowest level since Dec. 12.

The increase of 88,000 U.S. jobs in March, smaller than the most-pessimistic forecast in a Bloomberg News survey of economists, gives Fed Chairman Ben S. Bernanke and his colleagues reason to press on with $85 billion in monthly bond purchases aimed at reducing unemployment.

Labor, Sales

The jobless rate fell to a four-year low of 7.6 percent from 7.7 percent, while average hourly earnings were unchanged, the Labor Department report April 5 showed.

Retail sales stagnated in March, after gaining 1.1 percent in February, based on a Bloomberg survey before the Commerce Department reports the figure April 12.

The Federal Open Market Committee said in a March 20 statement it will continue its asset purchases until the labor market improves “substantially.”

Bernanke is scheduled to speak at 7:15 p.m. in Atlanta at a conference on “Maintaining Financial Stability.”

The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, shrank to 2.46 percentage points, approaching the narrowest this year. The average for the past decade is 2.20 percentage points.

Moving Average

U.S. 10-year Treasury yields fell below their 200-day moving average of 1.74 percent on April 5. Moving averages are indicators of momentum.

Japan’s 10-year bond yielded 0.53 percent, rising from the all-time low set last week when central bank Governor Haruhiko Kuroda said he’s increasing debt purchases to 7.5 trillion yen ($75.9 billion) a month to battle deflation.

Japan’s biggest investors are shunning their government’s bonds in favor of Treasurys, endorsing the policies of the Bank of Japan’s Kuroda to spark inflation and aiding Bernanke’s efforts to spur U.S. economic growth.

Mizuho Asset Management Co., a unit of Japan’s third- largest bank, is buying Treasurys, as are Sumitomo Mitsui Trust Asset Management Co. and Mitsubishi UFJ Asset Management Co., which together oversee the equivalent of $138.3 billion. The securities have become appealing as rising Japanese bond prices pushed yields below those of U.S. debt by the most since 2011.

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Treasurys were among the world s best-performing bonds in the past month after a smaller-than- forecast job gain in March indicated the Federal Reserve will keep purchasing debt to spur the economy. U.S. government securities due in 10 years and longer returned 6.2 percent...
Monday, 08 April 2013 07:27 AM
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