Treasuries Fall on Investor Confidence for Europe Deal

Treasuries declined, shoving ten-year yields higher for the 3rd day, as hopefulness that the finance ministers of Europe are near to a debt-reduction pack for Greece damped refuge demand.

10-year yields climbed to nearly 2-week high as the United States sold $13 billion in TIPS (Treasury Inflation Protected Securities) of the same maturity at higher-than-predicted yield of negative 0.72%. The debt of US government, due in ten year and even longer, has paid back 2.2% in the last month, the highest amongst securities in 144 indexes tracked by the European Federation of Financial Analysts Societies. Yesterday, volatility fell to a 5-year low.

Guggenheim Partners LLC’s (a brokerage for institutional investors based in New York) director of U.S. government trading Jason Rogan told that they were driven by what was happening in Europe.

The standard ten-year yield climbed 0.01 percentage point or 1-basis point to 1.68% at 12:23 p.m. in New York. The 1.625% security, which is due in Nov. 2022 fell $1.25 per $1,000 face amount or 1/8 to 99 1/2. The yield attained 1.69%, the highest since November 8.

The Financial Markets Association and Securities Industry recommends a complete market closure on Thursday for the Thanksgiving Day holiday and also an early closure on Friday at 2 pm New York time.

Volatility Sinks                                                                      

Volatility in United States government bonds fell to the least in over 5 years prior to the holiday.

Yesterday, the volume of treasury trading climbed to $241.6 billion when compared to $241 billion of 2012 daily average, as per ICAP Plc, the biggest interdealer broker of United States government debt. The number was high when compared to $177 billion the day before.

Unemployment claims reduced to 410,000, indicating a decrease of 41,000 in the week that finished on November 17 as the labor market damage caused by Sandy storm started to subside, as reported by the Labor Department in Washington.

 TIPS Trade

10-year TIPS yielded a negative 0.764% just ahead of today’s auction. The rate dropped to the steepest 0.96% last month, with the investors worried about inflation that they are ready to accept yields less than zero to purchase debt that safeguards against price gains.

Today’s demand was stronger than the previous auction, pulling to 2.52 bid-to-cover ratio as against the previous sale’s 2.36, the least after 2009.

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