Treasury bonds advanced for a third day in the longest streak of gains this month

Treasury bonds advanced for a third day in the longest streak of gains this month as the escalation of tensions on the Korean peninsula drove investors to the perceived safety of U.S. government debt.

Bond yields also rose about one percentage point higher than under attracted buyers this year. South Korea said today that a live fire drill was completed without incident after threats of retaliation by North Korea. The Federal Reserve is scheduled to buy up to $ 17 billion of Treasury bonds with maturities between 2014 and now 2020.

"What happened in Korea is of course something that the markets are aware of and lying in the bottom," said Rasmus Enthusiast, fixed income strategist at Credit Suisse Group AG in Zurich. "Any global crisis will cause a rally in Treasuries."

The yield on the benchmark 10-year bond fell one basis point to 3.32 percent as of 6:03 am in New York, according to BGCantor Market Data. The guarantee of 2,625 percent, due in November 2020 gained 3 / 32, or $ 0.94 per $ 1,000 face amount, to 94 5 / 32.

Treasuries rose on December 16 and December 17, pushing 10-year yields by 20 basis points, or 0.20 percentage point. The yield rose to 3.56 percent on Dec. 16, the low this year of 2.33 percent on Oct. 8.

ten-year rates will be reduced to 2.98 percent on March 31.
live-fire exercises "would be impossible to prevent the situation on the Korean peninsula after the explosion," he cited North Korea's state Korean Central News Agency of the Ministry of Foreign Affairs said on 18 December.

Flattening of the curve

U.S. government bonds fell this month as the gap between yields on Treasuries with longer maturities showed purchases by the Fed, its second round of quantitative easing, may be the last.

The difference between 10 - and 30-year yields fell to 1.05 percentage points on December 15 from a record 1.60 points on November 10, the most since the 1980s. The change in the yield curve call is being held as Bank of America Merrill index data show Lynch U.S. bonds due in 10 years or more lost 4.64 percent this month, trimming gain of 2.010 to 8.37 percent.

Flattening usually heralds the end of the Fed cuts interest rates to stimulate growth. U.S. reports this month showed gains in retail sales, consumer sentiment and industrial production after the central bank increased its balance to a record high of 2.39 billion, injecting money into the financial system. Is the addition of 600 billion dollars, buying Treasury bonds through the so-called quantitative easing.

End of Cycle

"A peak in the yield spread between 10 and 30 marks the end of an easing cycle," said Steven Wieting, managing director of economic and market analysis at Citigroup Inc. "It's part of a recovery and improvement of growth expectations. If the outlook is for a stronger recovery, then QE is limited and can not expand beyond it. "

The U.S. economy grew at an annual rate of 2.8 percent in the third quarter, faster than the 2.5 percent estimate issued last month, the Commerce Department said December 22. Consumer spending rose 0.5 percent in November after an increase of 0.4 percent in October, a survey showed that before the December 23 report.

"The economy continues to recover," said Hiroki Shimazu, a Tokyo-based economist at Nikko Cordial Securities Inc., part of Sumitomo Mitsui Financial Group Inc., Japan's third-largest bank by assets traded. "Fear of deflation will gradually disappear. The push up yields."

Less bearish outlook

The 10-year rate can increase to 3.5 percent by June 30, Shimazu said.

The difference between yields on 10-year bonds and Treasury inflation-protected securities, an indicator of expectations operator in consumer prices during the life of the securities, widened to 2.29 percentage points this year low of 1.47 percentage points in August. The five-year average is 2.09 percentage points.

Fund managers in a survey of Ried Thunberg ICAP weekly Inc. became less pessimistic about the outlook for Treasuries in March.

Ried sentiment index rose to 48 for the seven days ended December 17, 1946 before the week. A figure below 50 indicates investors expect prices to fall. The company, which is a unit of the world's largest broker interbank and is based in Jersey City, New Jersey, interviewed 26 money managers control $ 1380000000000.