Treasury 10-year yield below 2% on Europe debt crisis, jobs data

April 19 (Bloomberg) -- Treasury 10-year note yields traded below 2% for a fifth day on concern the European debt crisis may worsen and as U.S. jobless claims and home sales missed forecasts, stoking demand for the safest assets.

The U.S. 10-year note has stayed within seven basis points of 2% for almost two weeks in the longest stretch below the level since February. Yields increased at French and Spanish bond auctions, underlining concern that Europe’s debt crisis is far from over. The U.S. is scheduled to sell a record $16 billion in inflation-linked securities and the Federal Reserve plans to buy as much as $2 billion in Treasuries.

“Fixed-income investors are not ignoring the fact that, over the last three weeks, economic data has been worsening,” said Dan Greenhaus, chief global strategist at the broker-dealer BTIG LLC in New York. “Europe is obviously an important portion of the story.”

The 10-year yield fell two basis points, or 0.2 percentage point, to 1.95% at 12:24 p.m. New York time, according to Bloomberg Bond Trader prices. The 2% note due February 2022 rose 6/32, or $1.88 per $1,000 face value, to 100 13/32. The yield has stayed between 1.94% to 2.07% since April 7.

Jobless claims rose last week to 386,000, a Labor Department report showed. The median forecast of 47 economists in a Bloomberg News survey was for a drop in jobless claims to 370,000 in the week ending April 14 from a revised 388,000 the previous week.

Home Sales

Sales of previously owned U.S. homes in March unexpectedly fell for the third time in the last four months, with purchases dropping 2.6% to a 4.48 million annual rate from 4.6 million in February, the National Association of Realtors reported in Washington. The median forecast of economists in a Bloomberg News survey called for an increase to 4.61 million. In January, sales at a 4.63 million rate were the strongest since May 2010.

Home starts slowed to a five-month low in March, the Commerce Department said April 17.

U.S. government debt was little changed this year as of yesterday, while Treasury Inflation Protected Securities rose 2.5%, according to Bank of America Merrill Lynch Indexes.

Valuation measures show Treasuries are at the most expensive level in six weeks. The term premium, a model created by economists at the Fed, reached negative 0.66%, the most expensive since March 7. A negative reading indicates investors are willing to accept yields below what’s considered fair value.

‘Fiscal Concerns’

Treasuries have fluctuated between gains and losses each day this week. They rose yesterday as concern about Europe’s debt crisis boosted demand for the safest assets.

Bank of America Merrill Lynch’s MOVE index, which measures Treasury price swings based on options, dropped yesterday to 72.5 basis points, below this year’s average of 79 basis points. It reached 93.3 basis points on March 20, the highest level this year.

“The market is once again reminded of the broader credit and fiscal concerns facing Europe,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut.

Spain auctioned 2.54 billion euros of two- and 10-year debt, compared with a maximum target of 2.5 billion euros ($3.28 billion). The nation sold its 10-year benchmark bonds at an average yield of 5.743%, compared with 5.403% when it last sold them in January.

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