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March 29 (Bloomberg) -- U.S. Treasury notes rose before a report forecast to show consumer confidence fell for a second straight month.
Demand for Treasuries also increased as some investors said yields near their highest in nine months offered sufficient compensation for inflation. Ten-year note yields reached 4.69 percent on March 24, the highest since June, on speculation the economy is growing fast enough to allow companies to pass on higher materials costs to consumers.
``We're at fair value'' for U.S. bonds, said James Glassman, senior U.S. economist at J.P. Morgan Chase Securities Inc. in New York. He said Treasury prices already reflect expected interest- rate increases by the Federal Reserve.
The 4 percent note maturing February 2015 increased 5/16, or $3.13 per $1,000 face amount, to 95 9/32 at 9:05 a.m. in New York, according to bond broker Cantor Fitzgerald LP. Its yield fell 4 basis points, or 0.04 percentage point, to 4.60 percent, after rising 5 basis points yesterday. A basis point is 0.01 percentage point. The yield is up from 4 percent last month.
``The move higher we've had in yields gives investors more reason to buy,'' said Wee-Khoon Chong, a fixed-income strategist in London at Royal Bank of Scotland Group Plc. ``We're still seeing underlying demand.''
Investors in Treasury securities are at their most bullish in seven weeks. Ried, Thunberg & Co.'s weekly index measuring the outlook for U.S. government debt rose to 42 from 40 on March 25, the highest since Feb. 4. The 32 investors polled by the bond research firm, based in Jersey City, New Jersey, manage a combined $1.25 trillion.
Treasury Slump
A signal by Fed policy makers on March 22 that pricing pressures in the U.S. economy are increasing helped fuel a move higher in government bond yields. The Fed has lifted its benchmark interest rate seven times since June, to 2.75 percent from 1 percent, to combat the threat of inflation.
Treasury securities have lost 1.08 percent this quarter, including reinvested interest, the worst of 19 major government debt markets tracked by Merrill Lynch & Co. The firm's index of all sovereign debt is up 0.22 percent this quarter.
``Treasuries are attractive compared with European bonds as they offer much higher yields,'' said Satoshi Asai, who helps oversee $1 billion of bonds in Tokyo at Sompo Japan Asset Management, the unit of Japan's third-largest casualty insurer.
U.S. 10-year Treasury yields exceed the comparable German bund by 91 basis points, about the most since 2000. The gap was 55 basis points last month.
Consumer Confidence
U.S. consumer confidence probably fell for a second straight month in March as higher gasoline prices hurt sentiment, economists said in advance of a report scheduled for release today at 10 a.m. New York time.
The Conference Board's index most likely slipped to 103 from a previously reported 104 in February, according to the median forecast of 60 economists surveyed by Bloomberg News.
At current yields for 10-year notes, ``the risk is for the economic data to be a little softer, in which case you could get a big short-covering rally,'' said James Caron, an interest-rate strategist at Merrill Lynch in New York
Hedge-fund managers and other large speculators increased their net-short position in 10-year note futures in the week ending March 22, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 219,385 contracts on the Chicago Board of Trade. Net-short positions rose by 72,331 contracts, or 49 percent, from a week earlier, the Washington-based commission said in its Commitments of Traders report.
Inflation Forecast
A report on March 31 will probably show a measure of inflation calculated by the Fed held steady in February, according to the median estimate of 12 economists surveyed by Bloomberg News. The following day economists expect a separate report to show the U.S. created 220,000 jobs in March.
``Given the sell-off we've had, we need the inflation number this week to surprise on the upside,'' said Cyril Beuzit, head of interest-rate strategy in London at BNP Paribas SA. Still, ``over the medium-term, we expect higher bond yields.''
Cantor Viewpoint's director of economic commentary, John Herrmann, raised his forecast for 10-year U.S. Treasury note yields, betting the Fed will increase its interest-rate target more than initially expected.
Ten-year yields are likely to rise to 5.06 percent by year- end, Herrmann wrote in a report yesterday. Earlier this month, he forecast the yield would reach 4.80 percent. Cantor Viewpoint is a unit of Cantor Fitzgerald, one of the world's two largest Treasury bond brokers.
The median estimate of 63 economists polled by Bloomberg between March 1 to March 8 was for the yield to end the year at 4.90 percent.
Fed policy makers will increase their target rate to 4.25 percent this year, according to Herrmann, who had previously forecast the key rate ending 2005 at 4 percent.
To contact the reporter on this story:
Elizabeth Stanton in New York at estanton@bloomberg.net
To contact the editor responsible for this story:
Robert Burgess at bburgess@bloomberg.net
Last Updated: March 29, 2005 09:07 EST
March 29 (Bloomberg) -- U.S. Treasury notes rose before a report forecast to show consumer confidence fell for a second straight month.
Demand for Treasuries also increased as some investors said yields near their highest in nine months offered sufficient compensation for inflation. Ten-year note yields reached 4.69 percent on March 24, the highest since June, on speculation the economy is growing fast enough to allow companies to pass on higher materials costs to consumers.
``We're at fair value'' for U.S. bonds, said James Glassman, senior U.S. economist at J.P. Morgan Chase Securities Inc. in New York. He said Treasury prices already reflect expected interest- rate increases by the Federal Reserve.
The 4 percent note maturing February 2015 increased 5/16, or $3.13 per $1,000 face amount, to 95 9/32 at 9:05 a.m. in New York, according to bond broker Cantor Fitzgerald LP. Its yield fell 4 basis points, or 0.04 percentage point, to 4.60 percent, after rising 5 basis points yesterday. A basis point is 0.01 percentage point. The yield is up from 4 percent last month.
``The move higher we've had in yields gives investors more reason to buy,'' said Wee-Khoon Chong, a fixed-income strategist in London at Royal Bank of Scotland Group Plc. ``We're still seeing underlying demand.''
Investors in Treasury securities are at their most bullish in seven weeks. Ried, Thunberg & Co.'s weekly index measuring the outlook for U.S. government debt rose to 42 from 40 on March 25, the highest since Feb. 4. The 32 investors polled by the bond research firm, based in Jersey City, New Jersey, manage a combined $1.25 trillion.
Treasury Slump
A signal by Fed policy makers on March 22 that pricing pressures in the U.S. economy are increasing helped fuel a move higher in government bond yields. The Fed has lifted its benchmark interest rate seven times since June, to 2.75 percent from 1 percent, to combat the threat of inflation.
Treasury securities have lost 1.08 percent this quarter, including reinvested interest, the worst of 19 major government debt markets tracked by Merrill Lynch & Co. The firm's index of all sovereign debt is up 0.22 percent this quarter.
``Treasuries are attractive compared with European bonds as they offer much higher yields,'' said Satoshi Asai, who helps oversee $1 billion of bonds in Tokyo at Sompo Japan Asset Management, the unit of Japan's third-largest casualty insurer.
U.S. 10-year Treasury yields exceed the comparable German bund by 91 basis points, about the most since 2000. The gap was 55 basis points last month.
Consumer Confidence
U.S. consumer confidence probably fell for a second straight month in March as higher gasoline prices hurt sentiment, economists said in advance of a report scheduled for release today at 10 a.m. New York time.
The Conference Board's index most likely slipped to 103 from a previously reported 104 in February, according to the median forecast of 60 economists surveyed by Bloomberg News.
At current yields for 10-year notes, ``the risk is for the economic data to be a little softer, in which case you could get a big short-covering rally,'' said James Caron, an interest-rate strategist at Merrill Lynch in New York
Hedge-fund managers and other large speculators increased their net-short position in 10-year note futures in the week ending March 22, according to U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets prices will fall, outnumbered long positions by 219,385 contracts on the Chicago Board of Trade. Net-short positions rose by 72,331 contracts, or 49 percent, from a week earlier, the Washington-based commission said in its Commitments of Traders report.
Inflation Forecast
A report on March 31 will probably show a measure of inflation calculated by the Fed held steady in February, according to the median estimate of 12 economists surveyed by Bloomberg News. The following day economists expect a separate report to show the U.S. created 220,000 jobs in March.
``Given the sell-off we've had, we need the inflation number this week to surprise on the upside,'' said Cyril Beuzit, head of interest-rate strategy in London at BNP Paribas SA. Still, ``over the medium-term, we expect higher bond yields.''
Cantor Viewpoint's director of economic commentary, John Herrmann, raised his forecast for 10-year U.S. Treasury note yields, betting the Fed will increase its interest-rate target more than initially expected.
Ten-year yields are likely to rise to 5.06 percent by year- end, Herrmann wrote in a report yesterday. Earlier this month, he forecast the yield would reach 4.80 percent. Cantor Viewpoint is a unit of Cantor Fitzgerald, one of the world's two largest Treasury bond brokers.
The median estimate of 63 economists polled by Bloomberg between March 1 to March 8 was for the yield to end the year at 4.90 percent.
Fed policy makers will increase their target rate to 4.25 percent this year, according to Herrmann, who had previously forecast the key rate ending 2005 at 4 percent.
To contact the reporter on this story:
Elizabeth Stanton in New York at estanton@bloomberg.net
To contact the editor responsible for this story:
Robert Burgess at bburgess@bloomberg.net
Last Updated: March 29, 2005 09:07 EST
