(Bloomberg News) Treasuries headed for a monthly loss on concern yields that are within 20 basis points of the record low will curb demand when the U.S. sells $29 billion of seven-year notes today.
U.S. government securities slid 0.2 percent in June as of yesterday, trimming their gain for 2012 to 1.9 percent, according to Bank of America Merrill Lynch data. High-yield bonds in the nation returned 1.5 percent this month, or 6.6 percent this year, the figures showed. BlackRock Inc., the world's biggest money manager, and JPMorgan Chase & Co., the largest U.S. bank, favor corporate bonds.
"People are taking on a little more risk to get a lot higher yield than they can get from Treasuries," said Ali Jalai, who trades U.S. debt in Singapore at Scotiabank, a unit of Bank of Nova Scotia, one of the 21 primary dealers authorized to deal with the Federal Reserve. "Housing is recovering. The economy isn't going into a recession."
Benchmark 10-year yields increased one basis point, or 0.01 percentage point to 1.63 percent as of 12:25 p.m. in Tokyo, according to Bloomberg Bond Trader data. The 1.75 percent note due in May 2022 fell 3/32, or 94 cents per $1,000 face amount, to 101 3/32.
The all-time low yield was 1.44 percent set June 1 as investors sought Treasuries as a haven from Europe's fiscal crisis. European Union leaders are scheduled to meet today and tomorrow as they look for ways to help governments in the region pay their debts.
Japan's 10-year rate rose one basis point today to 0.81 percent, versus this year's low of 0.79 percent set June 4.
"You've got to push for more and more yield," Eric Pellicciaro, the head of global rates investment at BlackRock, said yesterday on Bloomberg Television's "In the Loop" with Deirdre Bolton. "You've got to go to the best parts of the high-yield structure." New York-based BlackRock oversees $3.68 trillion.
Jan Loeys, the chief market strategist at JPMorgan Chase, also favors corporate bonds.
"High-grade credit overall is the best place to be," he said June 25 on Bloomberg Television's "Lunch Money" with Stephanie Ruhle and Adam Johnson. "Get out of equities."
Merrill Lynch's index of U.S. investment-grade and high- yield corporate bonds yields 3.03 percentage points more than Treasuries, narrowing from 3.48 percentage points at the end of 2011.
U.S. gross domestic product expanded at a 1.9 percent annual pace in the first-quarter, matching the government's previous estimate, economists surveyed by Bloomberg News projected ahead of the Commerce Department report today. Growth slowed from 3 percent in the final three months of last year.
Initial claims for unemployment insurance fell last week, a separate report will show, according to the surveys. Pending home sales and orders for durable goods rose in May, the government reported yesterday.
The U.S. seven-year notes being sold today yielded 1.109 percent in pre-auction trading, versus 1.203 percent at the last sale of the securities on May 24, which was the lowest on record.
Investors bid for 2.8 times the amount offered last month, versus the average of 2.84 times for the past 10 auctions.
Indirect bidders, the category of investors that includes central banks outside the U.S., bought 42.7 percent of the notes, versus the 10-sale average of 40.6.