Treasuries head for lowest average annual yield amid stalemate

‘Certainly Concerned’

House Speaker John Boehner, an Ohio Republican, and Obama have been unable to agree on the tax-rate increase on top earners Obama wants or the cuts to entitlement programs that Boehner seeks. The two haven’t spoken since the president flew to Hawaii on Dec. 21, according to a Republican aide who requested anonymity when discussing the negotiations.

“People are certainly concerned about the fiscal cliff,” said Guy Haselmann, an interest-rate strategist in New York at Bank of Nova Scotia, one of the 21 primary dealers that trade with the Fed. “Even if there is a deal, what does a deal mean, and how watered down is it going to be? We’re going to make all the hard decisions next year, so uncertainty just hangs over the marketplace.”

Treasuries have returned 2 percent this year on an annualized basis, set for the worst performance since a 3.7 percent loss in 2009, according to Bank of America Merrill Lynch Indexes. The Standard & Poor’s 500 Index of U.S. shares has returned 15 percent on a similar basis, including reinvested dividends, amid signs the U.S. economy is improving.

U.S. government securities have lost 0.3 percent this quarter and 0.7 percent this month, Merrill Lynch data show.

‘Relatively Stable’

“Longer-term interest rates have the potential to rise,” Tony Crescenzi, a portfolio manager and strategist at Pacific Investment Management Co. in Newport Beach, California, said in a television interview on “Bloomberg Surveillance” with Michael McKee and Sara Eisen. “One wants to avoid issues or underweight issues over 10 years in maturity.”

In the short term, yields will be “relatively stable,” he said, even as the inability of fiscal policy makers to bridge differences in the budget talks is draining confidence from the economy, Crescenzi said.

The S&P/Case-Shiller index of property values in 20 U.S. cities increased 4.3 percent from October 2011, the biggest 12- month advance since May 2010, the group said today in New York. The median forecast of 30 economists in a Bloomberg survey projected a 4 percent gain.

U.S. new-home sales climbed to a 380,000 annual rate in November, the most since April 2010, according to a Bloomberg News survey of economists before the Commerce Department reports the figure tomorrow.

Bloomberg News

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