U.S. 10-Year Treasury Yield Reaches Month Low After Earthquake Hits Japan

U.S. 10-Year Treasury Yield Reaches Month Low After Earthquake Hits Japan
Treasury 10-year yields declined to the lowest since January after an 8.9-magnitude earthquake and tsunami struck Japan, bolstering demand for the relative safety of U.S. government debt.

Five- and 10-year Treasuries fluctuated between gains and losses as investors assessed the extent of the damage cause by the temblor. Asian and European stocks declined. Thirty-year bonds were little changed before a U.S. report forecast to show retail sales rose in February by the most in four months.

“When people are unsure they grab safe assets and traditionally the safest assets are the very liquid shorter- dated government bonds,” said Steven Major, global head of fixed-income research at HSBC Holdings Plc in London. “No one really knows what the implications are” of the earthquake.

Ten-year yields declined one basis point to 3.35 percent as of 7:04 a.m. in New York, according to data compiled by Bloomberg. The 3.625 percent note maturing in February 2021 rose 3/32, or 94 cents per $1,000 face amount, to 102 9/32. The yield earlier slid as much as three basis points to 3.33 percent, the least since Jan. 31.

Prime Minister Naoto Kan mobilized Japan’s Self-Defense Forces and the central bank pledged to ensure financial stability after the earthquake struck off the coast of northern Japan, shaking buildings in Tokyo. The Philippines, Indonesia, Taiwan and Papua New Guinea were bracing for possible tsunamis as waves that may be traveling as fast as 800 kilometers an hour radiated from the epicentre.

‘Knocked Back’

The MSCI Asia Pacific Index of shares fell as much as 1.4 percent, putting the regional benchmark index on course for its biggest weekly drop since May. The Stoxx Europe 600 Index declined 0.8 percent.

U.S. retail sales rose in February by 1 percent, the most in four months, according to the median estimate in a Bloomberg News survey of economists before the data’s release.

“The market may get knocked back a little bit,” said Colin Embree, Singapore-based head of fixed-income trading and sales at Bank of Nova Scotia Asia Ltd., a unit of Canada’s third-largest lender. “We’ll be reminded today that the economy is improving.”

Separate reports in the U.S. today will show business inventories rose and consumer sentiment declined, according to economist estimates in Bloomberg surveys.

The spread between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, rose to 2.49 percentage points.

At an auction of 30-year bonds held yesterday, the securities yielded 4.569 percent, compared with an average forecast of 4.610 percent in a Bloomberg News survey of seven primary dealers.

The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.02, the highest since the auction on Aug. 10, 2000.

Treasuries have gained this month, returning 0.2 percent, Bank of America Merrill Lynch data show. The MSCI World Index of stocks dropped 2.1 percent in the period.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net