Vladimír Urbánek (Kurzy.cz)
Bonds  |  November 13, 2012 15:49:31

U.S. treasuries yields also reduce the risk of falling from = fiscal cliff rising


Yields of 10-year U.S. treasuries ie government bonds also fell, the most in a single day since May of this year resulting in 1.62%. For the past week yield decrease of 11 basis points, despite the fact that the government placed on the market in the past week bonds for $ 72 billion. From 21 September 2011, when the Fed began with Operation Twist, thus replacing bonds with shorter maturity bonds with longer maturities, the yield in early November by 25 basis points lower.

The largest growth in demand for U.S. bonds in the last 5 months of the comments related to the market growing conviction that the U.S. administration fails to prevent fall over the fiscal cliff, thus automatically start government austerity measures and tax increases in the total volume to 607 billionUSD in the event that lawmakers can not agree on the form of timely budget deficit for next year.
Congressional Budget Office estimated in this respect that the resulting measures will reduce the resulting GDP growth next year by about 0.5% and the unemployment rate to climb to 9.1%.

Interest on U.S. government bonds then stems from efforts to ensure that investors are buying bonds for cases from this scenario actually happens. Growth in demand for bonds increases their price and along with it pushes down the desired yield.
Interest on U.S. bonds also supports the growing belief that the EU can not handle the debt crisis in the eurozone.

According to recent surveys, Bloomberg, the U.S. economy will grow next year by 2% and 2.7% in 2014. Current average revenue expectations for the development of 10-year Treasuries yield around talking about 1,9-2% until at least March 2013. In June the market was estimated that revenues in this period will be around 2.5%. In January, the even numbered 2.84%.

For example, a leading global investment firm Pacific Investment Management manages 281 mld.USD generally increased since the end of September, the share of U.S. government bonds in its portfolio from 20 to 24%.

Administration this year will offer overall market bonds for 1.79 trillion. Market demand ratio has reached $ 3.17 for every dollar sold. In 2011, this ratio reached the level of $ 3.04 and $ 2.99 in 2010.
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