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Treasuries rallied, kicking yields down from near its topmost performing mark in two weeks, as deadly clashes in Ukraine’s east triggered demand for the safety of government debt.
U.S. debt trimmed down surges before the Treasury merchandises $96 billion in coupon-bearing notes beginning tomorrow. Treasuries retreated last week as an accord was achieve to begin winding down the Ukraine dispute. The decline made U.S. yields to surpassed those of its Group of Seven peers by the most since 2010.
“Safety flows will continue to ebb and flow with the news out of Ukraine,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “We’ve had some militant engagement,” with Russia, he said, “after it looked like we were turning a better corner, which has sent the Treasury market drifting lower in yield.”
Benchmark 10-year yields relinquished one basis point, or 0.01 percentage point, to 2.72 percent as of 5 p.m. in New York, based from Bloomberg Bond Trader financial values. The financial worth of the 2.75 percent note due in February 2024 boosted 2/32, or 63 cents per $1,000 face amount, to 100 9/32. The yield dropped as low as 2.69 percent and reached 2.73 percent, the highest performing mark since April 7.
The Bloomberg Global Developed Sovereign Bond Index has skyrocketed 3.4 percent this year, against a 4.6 percent pullback in 2013.
The Securities Industry and Financial Market Association proposed exchanging close during London hours for the holiday in the U.K.
Yield Disparity
Treasury trading volume moved down to $145 billion, the lowest since December 27, based from ICAP Plc, the biggest inter-dealer broker of U.S. government debt. It achieved $582.4 billion on March 13, the topmost mark in over nine months, based from ICAP.
Treasury 10-year notes yielded 67 basis points more than their Group of Seven peers last week, the highest in four years, as the Fed unwinds its bond-purchasing program while Europe and Japan consider extra purchases.
The disparity among 10-year yields in the U.S. and Germany grow to 1.21 percentage points last week, the largest since 2005 as the U.S. economic recovery reemerges.
Yields also rallied last week as primary unemployment claims were down than projected and consumer-financial values advances in March surpassed projections. A report today revealed that the index of U.S. leading indicators soared higher in March by the most in four months as the economic expansion bolsters.
The Conference Board’s index, a gauge of the outlook for the next three to six months, escalated 0.8 percent after a 0.5 percent climbed in February, the New York-based group declared today. The median projection of 42 economists polled by Bloomberg called for a hike of 0.7 percent.
“People are still looking for this bounce-back in economic activity,” said Thomas Tucci, managing director and head of Treasury trading in New York at CIBC World Markets Corp.
Fed Policy
The central bank is in the movement of scaling back the bond-purchase program it has utilized to help aid the economy. It has maintain its goal for overnight bank lending in a range of zero to 0.25 percent since December 2008. The central bank’s next policy assembly is April 29-30.
The Fed bought $3.6 billion in Treasuries maturing between January 2019 and December 2019 today.
The Treasury Department is scheduled to merchandise $32 billion of two-year notes tomorrow, $35 billion of five-year securities the day after and $29 billion of seven-year debt April 24.
“With most of the global markets closed and no place to offset risk exposure, you’ll see a bid for bonds, even ahead of the supply,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York.
Treasuries were aided today as at least three people were killed in a clash in Slovyansk in eastern Ukraine and a top security official pointed out Russia of exploiting the violence to prepare grounds for an invasion.
Haven Demand
“For now, buyers have come in,” said Justin Lederer, an interest-rate strategist at Cantor Fitzgerald LP in New York, one of the 22 primary dealers Fed. “It’s general uncertainty, it’s the back-and-forth headlines” on Ukraine.
Hedge-fund managers and other huge number of speculators lifted their net-short status in 10-year note futures last week, based from U.S. Commodity Futures Trading Commission data.
Speculative short positions, or bets financial values will drop, outnumbered long positions by 162,000 contracts on the Chicago Board of Trade on April 15, the highest since December 31, the Washington-based commission stated in its Commitments of Traders report.
Betting versus U.S. government debt this year is becoming a fool’s errand.
While the declines that their economists projected have yet to materialize, JPMorgan Chase & Co., Citigroup Inc. and the 20 other companies that trade with the Federal Reserve started wagering on a Treasuries selloff last month for the first time since 2011. The technique was upended as Fed Chair Janet Yellen warned she wasn’t in a rush to boost interest rates, two weeks after proposing the opposite at the bank’s March 19 assembly.
