Treasury 10-year note yields traded close to a two-week low as efforts to trim the European Union budget added to concern the region’s economy will struggle to expand, boosting demand for safer assets.
U.S. debt fluctuated after a report showed U.S. trade deficit narrowed more than forecast in December, led by record exports of petroleum that gave the world’s largest economy a boost at the end of 2012. Treasuries strengthened earlier today as German exports grew less than forecast in December, a report showed. U.S. 10-year yields were poised for the biggest weekly decline in more than two months.
“The concerns over Europe have taken the market up and seems to be the main driver of yields,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “The market is centered around the 2% level.”
The benchmark 10-year yield rose one basis point, or 0.01 percentage point, to 1.96% at 9:31 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.625% note due in November 2022 lost 1/32, or 31 cents per $1,000 face amount, to 97 1/32.
The yield reached 1.92% on Feb. 1, the least since Jan. 25. It has fallen five basis points this week, touching the biggest drop since the period ended Nov. 30.
Debt Sales
The Treasury kept next week’s so-called quarterly refunding auctions at $72 billion, the amount sold since November 2010. Given the government’s financing needs, it sells three-, 10- and 30-year securities each month in addition to its historical quarterly offerings.
The U.S. will sell $32 billion in three-year notes on Feb. 12, $24 billion in 10-year notes on Feb. 13, and $16 billion in 30-year bonds on Feb. 14.
U.K. Prime Minister David Cameron demanded cuts in a proposed seven-year subsidies package of 973 billion euros ($1.3 trillion). The amount was trimmed once, from 1.047 trillion euros in November, and it is less than the 994 billion euros spent in the budget period expiring this year.
“The numbers that were put forward were much too high,” Cameron told reporters yesterday. “They need to come down, and if they don’t come down, there won’t be a deal.”
Economic Data
Germany’s exports gained 0.3% from November, when they fell 2.2%, the Federal Statistics Office in Wiesbaden said today. Economists forecast a 1.4% increase, according to the median of 15 estimates in a Bloomberg News survey.
“Jitters in Europe have interrupted the rally in riskier assets and Treasuries are benefiting,” said Nick Stamenkovic, a strategist at RIA Capital Markets Ltd. in Edinburgh.
The U.S. trade gap shrank 20.7% to $38.5 billion, lower than any estimate in a Bloomberg survey of 73 economists and the least since January 2010, Commerce Department figures showed today in Washington. The jump in fuel sales to overseas buyers, combined with purchases of the fewest barrels of imported crude in almost 16 years, led to the smallest petroleum deficit since August 2009.
“It might be an improvement for the fourth quarter gross domestic product numbers,” Guggenheim Partners’ Rogan said. “We are continuing to see the economic news out of the U.S. gaining a little bit of steam but it’s nowhere near where it needs to be.”
The world’s biggest bond dealers are growing more reluctant to hold Treasuries, based on Federal Reserve data.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and the rest of the 21 primary dealers of U.S. government securities cut their holdings to $72 billion as of Jan. 30, the least since October, the Fed reported yesterday.
The figure compares with $146 billion on Dec. 19, the most in data compiled by Bloomberg dating back to 1997.
U.S. sovereign debt has returned 0.2% this month, according to a Bank of America Merrill Lynch index. It handed investors a 1% loss in January, the worst start to a year since 2009 on signs the U.S. economy is improving.
