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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (537845)	12/21/2009 1:11:37 PM
From: Road Walker	Respond to of 1575973

Treasury Yield Curve Steepens to Record Amid Growth Outlook Dec. 21 (Bloomberg) -- The Treasury yield curve, a barometer of the health of the U.S. economy, widened to a record as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented sales of government debt. The difference between 2- and 10-year Treasury note yields increased to 281.4 basis points before the government announces Dec. 23 how much it plans to auction in 2-, 5- and 7-year securities next week. It rose from 145 basis points at the beginning of the year, with the Federal Reserve anchoring its target rate at virtually zero and the U.S. extending the average maturity of its debt. A report tomorrow is forecast to show the world’s largest economy expanded in the third quarter. “If you are going to have a recovery you are going to have higher inflationary pressures, so the curve should continue to steepen from here,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. “The curve could reach 300 to 325 basis points.” The yield on the benchmark 10-year note climbed 10 basis points, or 0.10 percentage point, to 3.64 percent at 12:21 p.m. in New York, according to BGCantor Market Data, the highest level since Aug. 13. The 3.375 percent security due November 2019 fell 25/32, or $7.81 per $1,000 face amount, to 97 27/32. The two-year yield rose five basis points to 0.84 percent. The yield curve reached its previous record of 281 basis points on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level so far in 2009. Less Money Treasury officials on Nov. 4 announced a long-term target of six to seven years for the average maturity of Treasury debt and said the department wants to cut back on its issuance of bills and two- and three-year notes. The shift to longer- maturity debt has raised concern that investors will demand higher yields to offset the risk of inflation as government spending drives the deficit to a record $1.4 trillion. President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year. Treasuries of all maturities have fallen 2.4 percent this year through Dec. 18, according to Bank of America Corp. Merrill Lynch indexes. Government securities fell as Chinese central banker Zhu Min on Dec. 17 said that the U.S. can’t expect other nations to increase purchases of Treasuries to fund its entire fiscal shortfall. Efforts by the U.S. to cut its current-account deficit mean other nations accumulate fewer dollars through trade, leaving them with less money to buy Treasuries, Deputy Governer Zhu said at a forum in Beijing. $7.17 Trillion “The Chinese story is a reiteration of the concern that the Treasury Department might have reached its saturation point with foreign investors that have to grapple with their own internal financing problems,” said Ian Lyngen, senior government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “The Treasury has a lot of supply that needs to be taken down next year.” A Commerce Department report on Dec. 23 will show consumer spending rose 0.7 percent in November, the same as the previous month, according to the median estimate of 60 economists in a Bloomberg survey. “Household spending appears to be expanding at a moderate rate,” the Federal Open Market Committee said in a statement on Dec. 16 after its meeting. Interest rate futures show a 44 percent chance the Fed will raise the rate by June, from 31.4 percent odds a month ago. Spark Declines The gap between yields on Treasuries and so-called TIPS due in 10 years, a measure of the outlook for consumer prices, closed above 225 basis points for four days last week, the longest stretch since August 2008. That’s the low end of the range in the five years before Lehman Brothers Holdings Inc. collapsed, and shows traders expect inflation rather than deflation in coming months, said Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford, Connecticut. Fed Chairman Ben S. Bernanke has cited a tame inflation outlook for keeping the target interest rate for overnight loans between banks at a record low range of zero to 0.25 percent. TIPS show the improving economy may change sentiment and spark further bond declines. The 10-year breakeven rate was little changed at 230 basis points today, up from 9 basis points on the last trading day of 2008. To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net . Find out more about Bloomberg for iPhone: m.bloomberg.com