Yields on US bonds decline

US Treasury 10-year yields were near the lowest level in four weeks before a government report that economists expected will show global demand for US securities rose in November.

The 10-year note yield fell one basis point to 3.67 per cent in London, according to BGCantor Market data. The price of the 3.375 per cent security due in November 2019 rose 3/32, or 94 cents per $1,000 face amount, to 97 19/32.

Ten-year yields, a benchmark for consumer and corporate borrowing costs, declined to 3.66 per cent on January 15, the lowest level since December 21.

US 30-year fixed mortgage rates slid to 5.15 per cent from 5.37 per cent on December 28, which was the most since August, according to Bankrate.com in North Palm Beach, Florida.

Yields will fall as global economic growth slows, said Mike Zelouf, London-based director of international business at Western Asset Management.

The US government's $787 billion economic rescue plan contributed to the record $1.4 trillion deficit in fiscal year 2009, which ended in September.

"We do not expect a long period of recovery," Zelouf, who helps oversee $506.4bn, wrote in a note. Long-term yields will fall faster than those on shorter maturities, he added.

The opposite has been true this year. Ten-year notes yielded 2.80 percentage points more than two-year Treasuries, after the spread widened to a record 2.90 percentage points on January 11.

European governments are also increasing the amounts they borrow, and the deluge that left investors with the lowest relative returns since 1995 will continue for seven years.

German 10-year government bond yields were near the lowest in almost four weeks. The yield on the bund was unchanged at 3.24 per cent in London, within one basis point of the lowest since December 22. The 3.25 per cent security maturing in January 2020 gained 0.01, or 10 euro cents per 1,000-euro face amount, to 100.03. The two-year note yield rose one basis point to 1.14 per cent.

 

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