George Goncalves Comments: Treasurys Surge As Philly Fed's Employment Index Declines - Bloomberg News
Bloomberg News, September 18, 2009
Treasuries rose as stocks declined and a report on manufacturing in the Philadelphia region showed a fall in an employment index, driving speculation that recovery from the worst slump in seven decades will be slow.
The Treasury market's inability to drive yields below resistance levels will lead to lower prices as investors prepare for the auctions, according to RBS Securities Inc. The government plans to sell a record $112 billion in 2-, 5- and 7- year debt next week. The U.S. raised $1.2 trillion in new cash this year through sales of debt, according to government data.
“Economic growth is slow, which justifies lower rates,” said Lawrence Dyer, an interest-rate strategist in New York at HSBC Securities USA Inc., one of 18 primary dealers that trade with the Federal Reserve. “There is still uncertainty about what 2010 will bring when the Fed's support winds down.”
The 10-year note yield fell eight basis points, or 0.08 percentage point, to 3.40 percent at 4:11 p.m. in New York, according to BGCantor Market Data. The 3.625 percent security due August 2019 rose 21/32, or $6.56 per $1,000 face amount, to 101 28/32.
The Fed has sought to support Treasuries and cap consumer borrowing costs through the purchase of as much as $300 billion of the securities. The central bank has bought $285.169 billion through the program, which began March 25 and is scheduled to end in October.
“Recent chatter over Fed exit strategies has the market on its toes and slightly nervous,” George Goncalves, chief fixed- income rates strategist at primary dealer Cantor Fitzgerald LP, wrote in a note to clients. “Flattening risks will dominate in the days, weeks, months ahead.”
