Treasury yields fall to lowest in 6 weeks on Fed stimulus policy

Long Bets

Investors bid $2.88 for each dollar of the $1.554 trillion in U.S. government notes and bonds sold at auction this year, according to Treasury data compiled by Bloomberg. That’s down from the record $3.15 for the $2.153 trillion sold at last year’s offerings.

The Treasury also plans to sell $35 billion of five-year notes tomorrow and $29 billion of seven-year debt the next day.

Investors in Treasuries were long this week, betting that the prices of the securities will rise, according to a survey by JPMorgan Chase & Co.

The proportion of net longs remained steady at 8 percentage points in the week ending yesterday, according to JPMorgan, matching the position in the week ending Sept. 16. Outright longs dropped to 19%, from 21%, while outright shorts dropped to 11% from 13%. Investors raised neutral bets to 70% from 66%.

’Grinding Higher’

‘‘Momentum remains relatively constructive in the Treasury market in the wake of the Fed’s decision not to taper,” said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The market is grinding a little bit higher.”

Treasuries due in one to 10 years have returned 0.1% this quarter as of yesterday, based on the Bloomberg World Bond Indexes. U.S. government securities maturing in a decade and longer dropped 2.9%.

The market for U.S. government debt has yet to react to any potential impasse over raising the borrowing ceiling. Most federal operations would come to a halt when the fiscal year ends Sept. 30 if President Barack Obama’s administration and lawmakers can’t agree on a funding plan.

Treasuries that mature on Oct. 15 yielded 0.035%, from 0.037% two weeks ago. The rate on debt due Nov. 7 has held within two basis points of zero during the period.

Home Prices

Treasuries remained higher today as a report showed home prices in 20 U.S. cities rose in the 12 months through July by the most in more than seven years, helping boost owner equity.

The S&P/Case-Shiller index of property values in 20 cities increased 12.4% from July 2012, matching the median projection of 31 economists surveyed by Bloomberg and the biggest year-to-year advance since February 2006, a report from the group showed today in New York.

The Conference Board’s index of U.S. consumer confidence decreased to 79.7 in September from a revised 81.8 a month earlier, data from the New York-based private research group showed today. The Richmond Fed’s manufacturing index tumbled to zero from 14.

www.bloomberg.com

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