US Treasury at 3-week lows

US Treasury yields were near three-week lows as traders cut bets the Federal Reserve will increase borrowing costs while unemployment is near the most in 23 years.

The 10-year note yield climbed one basis point to 3.62 per cent in London, according to BGCantor Market Data.

The yield dropped to 3.58 per cent on February 26, the lowest level since February 9. The 3.625 per cent security due February 2020 fell 3/32, or 94 cents per $1,000 face amount, to 100 1/32.

The yield on 30-day federal funds futures contracts for December delivery declined to 0.44 per cent yesterday from 0.565 per cent a week earlier. It started this year at one per cent. The Fed has kept its target for overnight lending between banks in a range of zero to 0.25 per cent since December 2008.

Signs of financial help for Greece reduced some appetite for low-risk Treasuries but until that country's credit problem is resolved, worries over its drag on Europe will underpin some demand for US Government securities, analysts said.

Investors should focus on governments with lower credit or inflation risks, including Germany and Canada, while avoiding Greece and the UK, said Bill Gross, who runs the world's biggest mutual fund at Pacific Investment Management Company.

European Union Monetary Affairs Commissioner Olli Rehn said Greece needs to improve its plan to cut the group's largest budget deficit in "coming days".

The latest data on US manufacturing and consumer spending signalled the economy is growing but at a slower pace. This has reinforced expectations that the Federal Reserve needs to stick to its near-zero interest rate policy into late 2010 in an effort to keep the recovery intact.

Moreover, investors were on the sidelines as they brace for the government's jobs report on Friday, which will offer the most critical yardstick of the recovery. Thus far, the economy is still losing jobs despite growing since the third quarter of last year, analysts said.

 

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