Treasuries largely stable

24 Mar, 2011

Fixed-income managers see Treasury yields rising fairly steadily unless global turmoil produces more significant news shocks in the coming weeks. Prices were largely stable on Tuesday as economic data remained a distant second to concerns about the extent of nuclear reactor damage in quake-stricken Japan and political instability in the Middle East and North Africa For details, see.
But once the news flow slows, signs of improvement in the US economy could again begin buoying yields, according to two fixed-income portfolio managers. "We'd look for yields, at least in the short term, to drift a little bit higher," said Scot Johnson, senior client portfolio manager at Invesco in Houston.
Johnson spoke of Invesco traders' strategies across a range of fixed income funds, with a total of $190 billion in assets. He called for five-year note yields to rise to a range of 2.40 percent to 2.50 percent, but said Invesco was taking a neutral longer-term stance until the next price driver came into focus. Tuesday's market action revealed significant uncertainty among Treasury traders.
The bond market is also taking direction from stocks, which were little changed on Tuesday. Treasury volumes have dropped in recent days in a further sign the market has hit an impasse. The impending quarter-end and close of the Japanese fiscal year could also add a technical influence to yields as investors tidy their books. RBS noted that benchmark 10-year yields have fallen on average 7.1 basis points in the last five days of the quarter in seven of the last eight quarters.
The 10-year notes were last up 2/32 in price and yielding 3.33 percent, down from 3.34 percent at Monday's close. Two-year notes were finishing the day unchanged in price and yielding 0.66 percent, up from 0.64 percent on Monday, while five-year notes were yielding 2.04 percent, up from 2.02 percent on Monday. Thirty-year bonds rose 11/32 in price to yield. 4.44 percent, down from 4.46 percent on Monday. Corporate issuance was on track to rise on Tuesday, with some deals to finance mergers and acquisitions expected to hit the market, said IFR, a Thomson Reuters service.

Read Comments