Treasuries rose, pushing 10-year note yields to the lowest level in more than three weeks, as speculation Greece will be unable to avoid a default and declines in stocks boosted demand for a refuge.
Treasuries also gained on bets a report this week will show U.S. home sales failed last month to recoup February’s losses. Greece’s 10-year yields climbed to a euro-era record even as officials said restructuring isn’t an alternative. Finland’s euro-skeptic bloc won support in yesterday’s election, fueling concern plans to resolve the region’s debt crisis will flounder.
“Any time you have additional information that creates more uncertainty as it relates to the sovereign-debt crisis, it’s going to increase demand for safe-haven securities,” said James Barnes, a money manager in Wyomissing, Pennsylvania at National Penn Investors Trust, which oversees $1 billion in fixed-income assets.
Yields on 10-year notes fell three basis points, or 0.03 percentage point, to 3.38 percent at 8:59 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.625 percent securities maturing in February 2021 gained 1/4, or $2.50 per $1,000 face amount, to 102 1/32.
The benchmark note’s yield touched 3.36 percent, the lowest level since March 24. The two-year note yield slipped one basis point to 0.69 percent and touched 0.67 percent, also the lowest since March 24.
“Safe-haven flows are continuing to play a role, and that’s temporarily holding back Treasury yields,” said Philip Marey, a senior market economist at Rabobank Groep in Utrecht, Netherlands. “There’s somewhat of a slowdown in the U.S. economy, but I think most people already have taken that into account.”
Stocks Slide
The Stoxx Europe 600 Index slid 0.8 percent following last week’s 1.4 percent decline. Standard & Poor’s 500 Index futures expiring in June decreased 0.7 percent.
The cost of insuring Greek sovereign debt jumped 56 basis points to a record 1,221, according to CMA prices for credit- default swaps, indicating there’s a 64.5 percent probability of default within five years. Swaps on Portugal climbed to an all- time high of 616.5, according to CMA, and contracts on Ireland increased to 580.
“Euro-zone peripheral concerns are behind this morning’s rally,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “We see that echoed in weakness in European equities and wider credit-default swap spreads on Greece, Ireland and Portugal’s debt.”
Greek Request Reported
Greece’s government asked the International Monetary Fund and the European Union to extend the maturities of all the country’s debt, the Eleftherotypia newspaper said. Finance Minister George Papaconstantinou brought the request to EU finance ministers at their meeting in Hungary on April 8-9 and to representatives of the EU, European Central Bank and IMF who visited Athens in April, the Athens-based newspaper said, without saying where it got the information.
“Restructuring is not an issue we’re discussing,” Papaconstantinou said April 16 in Washington. “The pain and the cost” of doing so would be greater than repaying lenders.
A debt restructuring would be harmful for the country, and the government rejected it, said a Greek government spokesman, George Petalotis, responding to questions today in Athens.
In the U.S., purchases of existing homes climbed 2.5 percent in March after dropping 9.6 percent in the previous month, according to the median forecast in a Bloomberg News survey before the National Association of Realtors’ report April 20. Separate figures tomorrow may show housing starts rose 8.6 percent last month following a 23 percent plunge in February.
U.S. Core CPI
Treasury 10-year note yields slid nine basis points on April 15 after the Labor Department said the consumer price index excluding food and energy rose 0.1 percent in March, less than the 0.2 percent increase forecast by economists.
“There’s a better inflationary tone to the market,” National Penn’s Barnes said in a telephone interview. “We have some room in Treasury prices to appreciate based on inflation expectations.”
Investors are paying the smallest discounts for Treasuries other than the newest, most-traded bonds since the start of the financial crisis, a sign of growing demand even as the Federal Reserve’s $600 billion buying program approaches its conclusion.
Yields on older notes with 10 years left to maturity have fallen to within 11.4 basis points, or 0.114 percentage point, of those on the newest securities of the same maturity, down from the peak of 66.1 in January 2009, according to data from Barclays Plc. The difference for so-called off-the-run notes narrowed to as little as 6.6 basis points in February, the least since May 2007.
Unlikely to Soar
While investors typically pay the most for benchmark Treasuries, the shrinking gap suggests that U.S. borrowing costs are unlikely to soar when the central bank’s second round of so- called quantitative easing ends in June. The Barclays data show that the spread in yields is less now than in the five years before the credit crisis began in 2007.
“There will not be major disruptions in the functioning of the Treasury market,” said Eric Pellicciaro, the New York-based head of global rates investments at BlackRock Inc., which manages about $3.56 trillion in assets. Participation in the Treasury market will “remain high, if not higher,” he said.
Traders became more bearish on Treasuries through the end of June, according to a survey by Ried Thunberg ICAP Inc. The company’s sentiment gauge fell to 46 for the seven days ended April 15 from 47 the week before. A figure less than 50 indicates investors expect prices to decline. www.bloomberg.com
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