Trea­suries head for first monthly loss this year on Fed out­look


Trea­suries headed for their first monthly loss this year be­fore a govern­ment re­port fore­cast to show con­sumer spend­ing, which ac­counts for about 70 per­cent of the U.S. econ­omy, is in­creas­ing.

Shorter-term bor­row­ing costs rose as traders spec­u­lated growth will be enough to lead the Federal Re­serve to raise in­ter­est rates in 2015. The dif­fer­ence be­tween five- and 30year yields nar­rowed to 1.79 per­cent­age points this week, the small­est spread since 2009. Fed Bank of Chicago Pres­i­dent Charles Evans said the cen­tral bank will prob­a­bly raise in­ter­est rates in the sec­ond half of next year.

"There's more prob­a­bil­ity of a bear­ish mar­ket in Trea­suries," said Won­tark Doh, the head of over­seas fixed­in­come in­vest­ment at Sam­sung As­set Man­age­ment Co., South Korea's largest pri­vate bond in­vestor. Trea­suries were lit­tle changed, with the bench­mark 10-year yield at 2.68 per­cent as of 7:05 a.m. in Lon­don, ac­cord­ing to Bloomberg Bond Trader prices. The aver­age over the past decade is 3.46 per­cent.

The price of the 2.75 per­cent se­cu­rity due in Fe­bru­ary 2024 was 100 19/32. Trea­suries have fallen 0.1 per­cent this month, based on the Bloomberg U.S. Trea­sury Bond In­dex (BUSY), set for their first de­cline since De­cem­ber.

Doh said he'd con­sider buy­ing Trea­suries if the 10-year yield rises to 2.8 per­cent or 2.9 per­cent. Sam­sung As­set man­ages the equiv­a­lent of $105.7 bil­lion.

Ja­pan's 10-year yield was lit­tle changed at 0.63 per­cent. Aus­tralia's fell one ba­sis point to 4.07 per­cent. A ba­sis point is 0.01 per­cent­age point. The Bloomberg Global De­vel­oped Sov­er­eign Bond In­dex (BGSV) is lit­tle changed for March. It has risen 3 per­cent this year, poised for its best quar­terly per­for­mance in al­most three years. U.S. per­sonal spend­ing prob­a­bly rose 0.3 per­cent in Fe­bru­ary, fol­low­ing a 0.4 per­cent gain in Jan­uary, ac­cord­ing to a Bloomberg News sur­vey of econ­o­mists be­fore the Com­merce Depart­ment re­port to­day. Per­sonal in­come also in­creased 0.3 per­cent, based on the re­sponses. The re­port con­tains the Fed's pre­ferred in­fla­tion mea­sure, which prob­a­bly slowed to a year-on-year rate of 0.9 per­cent from 1.2 per­cent in Jan­uary, ac­cord­ing to the sur­vey. The fig­ure has been be­low the Fed's 2 per­cent tar­get for al­most two years.

Thom­son Reuters/ Univer­sity of Michi­gan will con­firm a drop in con­sumer con­fi­dence for March af­ter reporting the de­cline on a pre­lim­i­nary ba­sis two weeks ago, a sep­a­rate sur­vey shows.

Pri­mary deal­ers had a net po­si­tion of neg­a­tive $5.2 bil­lion in coupon-bear­ing Trea­suries in the week ended March 19, ac­cord­ing to a re­port yes­ter­day by Ward McCarthy and Thomas Si­mons at Jef­feries LLC in New York.

It was the first so-called net short po­si­tion since Septem­ber 2011, ac­cord­ing to the re­port. Jef­feries is one of the 22 deal­ers, those com­pa­nies that un­der­write the U.S. debt. While Trea­suries may fall later in 2014, April may start with a rally, said Wei­han Chen, a bond trader at Hon­tai Life In­sur­ance Co. in Taipei.

Some in­vestors may buy as the month and the first quar­ter close to put the bonds and notes sold this year into their portfolios, Chen said.

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