Treasury yields approach 3-month low on European slowdown signs

‘Positive Developments’

Payrolls increased by 161,000 last month after a 120,000 gain in March, a Bloomberg survey showed before the Labor Department announces the figures on May 4.

“We all know from listening to Bernanke that payrolls over the next several months are really what they’re focused on when it relates to quantitative easing,” said Tom Tucci, managing director and head of Treasury trading in New York at CIBC World Markets Corp. “The recovery’s not sustainable on its own. It needs further accommodation.”

U.S. policy makers have pledged to keep the benchmark target for overnight bank lending at almost zero until at least late 2014. The central bank has also purchased $2.3 trillion of debt in two rounds of quantitative easing, or QE, to lower borrowing costs.

John Williams, president of the San Francisco Fed, joined his counterparts from Richmond, Philadelphia and Atlanta yesterday in casting doubt on the need for additional purchases of bonds to push down longer-term interest rates. Three of them are voting members of the Federal Open Market Committee, which sets interest rates.

Slower Growth

Thresholds for further action “would be if we see economic growth slow to the point where we’re not seeing further progress in bringing the unemployment rate down,” Williams said at a conference in Beverly Hills, California. Those aren’t “the circumstances I currently expect,” he said.

The Fed plans to sell as much as $1.5 billion of Treasury Inflation Protected Securities from its holdings today. The notes will be those maturing from April 2013 to April 2015, according to the Fed Bank of New York’s website. The sales are part of the central bank’s effort to replace $400 billion of shorter-term debt in its holdings with longer maturities by the end of June to hold down borrowing costs.

Bloomberg News

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