Treasury Secretary Timothy F. Geithner will meet the top four leaders in Congress today, after chief executives from more than a dozen U.S. corporations shuttled from the Capitol to the White House yesterday and pressed both sides for an agreement to prevent triggering automatic spending cuts and tax increases on Jan. 1.
“The market is still focused on the fiscal cliff,” said Tom Porcelli, chief U.S. economist at Royal Bank of Canada’s RBC Capital Markets, a primary dealer. “It’s creating a cloud of uncertainty around this outlook.”
Treasuries advanced yesterday after the $35 billion five- year sale drew the highest demand in eight years from direct bidders amid concern Congress faces headwinds in resolving the fiscal cliff.
Direct bidders, non-primary dealer investors that place their orders with the Treasury, purchased 15.9 percent of the notes, the most since September 2004.
A $35 billion two-year auction on Nov. 27 drew orders for 4.07 times the amount of debt available, matching the record high from November 2011.
The seven-year notes scheduled for sale today yielded 1.05 percent in pre-auction trading. Today’s sale will conclude this week’s $99 billion in notes auctions.
The Fed is selling shorter-term Treasuries from its holdings and buying those due in six to 30 years under a program known as Operation Twist, which is scheduled to end next month.
The central bank bought Treasuries today maturing from February 2021 to November 2022, according to the Fed Bank of New York’s website.
Fed Bank of New York President William C. Dudley said he is weighing “unacceptably high” joblessness as he considers whether the central bank should increase its asset purchases.
“I will be assessing the employment and inflation outlook in order to determine whether we should continue Treasury purchases into 2013,” Dudley said today in the text of remarks for a speech in New York. “The Fed will promote maximum employment and price stability to the greatest extent our tools permit, and we will stay the course.”
The policy-setting Federal Open Market Committee next meets on Dec. 11-12 to assess the impact of record accommodation, including a plan to buy $40 billion in mortgage bonds per month to reduce unemployment. The central bank said last month it will buy bonds until the job market improves “substantially.”
Gross domestic product grew at a 2.7 percent annual rate, up from a 2 percent prior estimate, revised figures from the Commerce Department showed today in Washington. The median forecast of 82 economists surveyed by Bloomberg called for a 2.8 percent gain. Household purchases climbed at a 1.4 percent rate, the least in more than a year and down from a previously reported 2 percent rate, and income gains were also cut.
Ten-year yields will end the year at 1.74 percent, according to Bloomberg surveys. They will climb to 1.85 percent in the first quarter of next year, the predictions show.