Treasury yields were the highest relative to their Group-of-Seven peers in 18 months after billionaire investor George Soros warned the economic recovery will increase borrowing costs.
Bonds in an index of G-7 debt excluding Treasurys yielded 17 basis points more than U.S. government securities, according to data compiled by Bloomberg. The difference was the least since July 2011. The Federal Reserve plans to buy as much as $1.75 billion of U.S. debt due from 2036 to 2042 Monday, according to the Fed Bank of New York website, part of its plan to pump money into the economy to sustain the expansion.
“Treasurys are not attractive,” said Hiroki Shimazu, an economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-largest publicly traded bank by market value. “There’s a continuing recovery in the U.S. Inflation expectations are rising.”
Benchmark 10-year yields were little changed at 1.95 percent as of 12:17 p.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in November 2022 was 97 5/32. Ten-year rates will surpass 2 percent by year-end, Shimazu said.
“If the economy actually gathers momentum and the money injected into the system gathers momentum, interest rates will shoot up and arrest the recovery,” Soros said in a Bloomberg News interview Jan. 26 at the World Economic Forum annual meeting in Davos, Switzerland. “We are facing, I think, a period of go-stop, which is far superior to no go at all.”
Central banks in the U.S., the U.K. and Japan are all buying bonds to pump money into their economies as they try to spur growth. The European Central Bank has indicated it is willing to do so.
Japan’s 10-year rate advanced 1 1/2 basis points to 0.74 percent. It was the first increase in a week.
Treasurys have handed investors a 0.9 percent loss in January, according to Bank of America Merrill Lynch indexes, as signs of improvement in the economy cut demand for the relative safety of U.S. debt. It’s the worst monthly performance since March.
The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, widened to 2.56 percentage points last week. The average over the past decade is 2.19 percentage points.
The Treasury Department is scheduled to sell $35 billion of two-year notes today. It also plans to auction $35 billion of five-year debt tomorrow and $29 billion of seven-year securities on Jan. 30.
Durable goods orders rose for a fourth month in December, based on a Bloomberg News survey of economists before the Commerce Department reports the figure at 8:30 a.m. today in Washington.
Employers added 160,000 workers in January, after a 155,000 increase in December, based on a separate survey before the Feb. 1 report from the Labor Department. Other data this week may show manufacturing is stabilizing and consumers are spending, based on responses from economists.
Treasurys fell on Jan. 25 as the European Central Bank said banks will repay more of its loans than forecast, spurring optimism the worst of the European debt crisis is over.
The ECB said lenders will pay back 137.2 billion euros ($184.7 billion) of its three-year loans, so-called Longer-Term Refinancing Operations, this week. That compares with the median forecast of 84 billion euros in a Bloomberg survey of economists.
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