Treasuries advance before bond market shuts down for hurricane

Market to close at 12 p.m. EST

Hurricane Haven

The hurricane led some investors to buy Treasuries as a haven, said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender.

The Treasury is scheduled to sell $32 billion of three- month bills, $28 billion of six-month securities and $25 billion of four-week debt today. The Fed is scheduled to sell $7 billion to $8 billion of Treasuries due from November 2015 through December 2015 at 11 a.m. The sales are part of the Fed’s program to replace short-term debt in its portfolio with longer-term Treasuries in an effort to keep borrowing costs low.

The securities association will monitor conditions to determine any additional recommendations for tomorrow, it said in its statement.

Household purchases, which account for about 70 percent of the economy, rose 0.8 percent, the most since February, after a 0.5 percent gain the prior month, a Commerce Department report showed today in Washington. The median estimate in a Bloombergsurvey of 71 economists called for a 0.6 percent rise. Incomes rose 0.4 percent, the most since March.

Historical Prices

From Treasuries to mortgage securities to corporate bonds, returns on U.S. fixed-income assets have averaged 6.5 percent throughout President Barack Obama’s term, exceeding the 4.6 percent during the previous four years under George W. Bush, according to Bank of America Merrill Lynch indexes. Yields on America’s fixed-income assets are seven basis points less than the global average, compared with 51 basis points more back then, the data shows.

The rally in Treasuries is almost over, and 10-year yields will rise to 2 percent by year-end, said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc.

“I’m not recommending my customers buy Treasuries,” Shimazu said. “Equities and commodities are much better investments. The economy isn’t great, but it continues to recover.”

Treasuries gained 1.7 percent in 2012 through last week, the Bank of America figures show. The MSCI All-Country World Index returned 13 percent, according to data compiled by Bloomberg. The S&P GSCI Index of commodities was little changed.

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