May 7 (Bloomberg) -- Treasury long-term notes and bonds were the world’s best-performing government securities over the past month before Federal Reserve Chair Janet Yellen testifies to Congress today.
The Fed said April 30 it will keep the benchmark interest- rate target at almost zero for a “considerable time” after its bond-buying program ends. Yellen is scheduled to testify before the congressional Joint Economic Committee today and the Senate Budget Committee tomorrow. Unrest in Ukraine is supporting demand for the safest assets. The U.S. plans to auction $24 billion of 10-year notes today and $16 billion of 30-year bonds tomorrow, following a $29 billion three-year sale yesterday.
“It’s too early to change the Fed’s view and Yellen won’t signal rate hikes are in the offing any time soon,” said Nick Stamenkovic, a fixed-income strategist at broker RIA Capital Markets Ltd. in Edinburgh. “Treasuries are also benefiting from safe-haven status. Technically, the market looks vulnerable and we could see 2.50 percent being tested in the near term on the 10-year yield.”
Benchmark 10-year yields rose two basis points, or 0.02 percentage point, to 2.61 percent at 8:20 a.m. in New York, based on Bloomberg Bond Trader data. The price of the 2.75 percent note due in February 2024 declined 5/32, or $1.56 per $1,000 face amount, to 101 6/32. The yield fell to 2.57 percent on May 5, a level not seen since Feb. 3.
U.S. government securities due in 10 years and more returned 3.5 percent in the month ended yesterday, the most of 144 debt indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
The Fed reduced its monthly debt purchases to $45 billion on April 30, its fourth straight $10 billion cut, and said further reductions are likely in “measured steps” if the economy continues to improve.
The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.17 percentage points. The average for the past decade is 2.21.
Russia called on Ukraine to postpone a May 25 presidential election and draft a new constitution first, as the government in Kiev pursued a military offensive against separatists in the country’s east and south.
The decline in 10-year yields may damp demand at today’s auction given signs of improvement in the economy, said John Gorman at Nomura Holdings Inc. in Singapore. The company is a one of the 22 primary dealers that underwrite the U.S. debt.
The U.S. added 288,000 jobs in April, the Labor Department said this month, the most since January 2012. Separate data have shown gains in consumption, manufacturing and service industries.
“The yield level is entirely too low,” said Gorman, who is the head of dollar-denominated interest-rate products for Asia. “The data continue to come in stronger. The payroll number was extremely solid.”
The 10-year notes scheduled to be sold today yielded 2.645 percent in pre-auction trading, versus 2.72 percent at a previous auction on April 9.
Investors submitted bids for 2.76 times the amount of 10- year debt for sale last month, compared with 2.92 at a previous auction in March.
This week’s note and bond sales will raise $9.7 billion of new cash, as maturing securities held by the public total $59.3 billion, according to the U.S. Treasury.
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