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09 June 2023

Treasuries fall on likely debt sales

By Agencies

Treasuries fell, paring two weeks of gains, as stocks rose on speculation the US is planning to boost its stake in Citigroup, increasing the likelihood of additional debt sales as borrowing soars.

Ten and 30-year securities led the declines as the MSCI World Index snapped nine days of losses. The US is planning to sell a record $94 billion (Dh345bn) of notes this week, raising speculation investors will demand higher yields to purchase the securities.

Ten-year yields increased five basis points to 2.84 per cent in London, according to BGCantor Market Data. The price of the 2.75 per cent security due in February 2019 fell 12/32, or $3.75 per $1,000 face amount, to 99 08/32. A basis point is 0.01 percentage point.

The yield, which touched a record low of 2.04 per cent on December 18, has averaged 4.65 per cent during the past decade. Yields slid 10 basis points last week as falling stocks drove investors to bonds.

US yields indicate bets on inflation have been rising over the past three months.

The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, was 1.15 percentage points. The spread climbed from minus eight basis points in November, and the six-month average is 95 basis points.

The US will probably borrow $2.5 trillion during the fiscal year ending Sept. 30, according to Goldman Sachs Group, one of the 16 primary dealers required to bid at US debt sales. The figure is almost triple the $892bn in notes and bonds it sold in the previous 12 months.

In Asia, Japanese Government bond futures hit a one-month high as weakness in Tokyo share prices bolstered demand for safe-haven government debt.

March 10-year JGB futures climbed to 139.97, their highest since mid-January. But JGBs gave up some of their gains as US equity futures turned higher. March 10-year JGB futures rose 0.11 point to 139.61. The benchmark 10-year JGB yield edged down 0.5 basis point to 1.270 per cent.