Treasuries Rise

Treasuries may be the beneficiary of market turmoil.


Treasury Three-Month Bills Rise First Time in Six Days on Risk
By Deborah Finestone
Aug. 28 (Bloomberg) -- Treasury three-month bills rose for the first time in six days as investors sought refuge in the safest government securities on concern more banks may suffer losses related to the credit market crunch.
Investors bought bills as DBS Group Holdings Ltd., Singapore's largest bank, said it has more at risk from asset- backed debt than it earlier reported. State Street Corp., the largest U.S. money manager for institutions, had more credit lines to asset-backed commercial paper than European and U.S. peers, the Times of London reported.
``There's always headline risk, and that brings back the flight-to-quality trades,'' said Kevin Flanagan, a fixed-income strategist in Purchase, New York, at Morgan Stanley. ``Bills could be the beneficiary.''
Three-month bill yields fell 10 basis points, or 0.10 percentage point, to 4.4 percent at 11:57 a.m. in New York, according to Bloomberg data. Bill yields and prices move in the opposite direction.
Barclays Plc rebutted a Financial Times report that it provided funding to an investment unit for Landesbank Sachsen Girozentrale, the German public lender squeezed by the global credit crunch.
State Street said the credit quality of the assets in its conduit program is ``very good.'' The Boston-based investment custodian has credit lines to asset-backed commercial paper totaling $27.9 billion as of June 30, according to filings with the U.S. Securities and Exchange Commission.
Two-year Treasury notes remained higher after a report showed U.S. consumer confidence fell in August by the most since just after Hurricane Katrina two years ago.
Consumer Confidence
The New York-based Conference Board's index of confidence declined to 105 from a revised 111.9 in July. Economists had expected a reading of 104, according to a Bloomberg survey. Earlier today another report showed home prices in the U.S. dropped by a record amount in the second quarter.
Two-year Treasury yields fell 7 basis points to 4.15 percent, according to bond broker Cantor Fitzgerald LP. The price of the 4 5/8 percent security due in July 2009 rose 1/8, or $1.25 per $1,000 face amount, to 100 7/8.
``People are anticipating further weakness,'' said David Ader, head of U.S. government bond strategy in Greenwich, Connecticut, at RBS Greenwich Capital, one of 21 primary dealer firms that trade directly with the Federal Reserve. ``People are going back into two-year notes.''
Ten-year note yields were little changed at 4.56 percent after touching 4.54 percent, near the lowest since March 22.
Further gains in the benchmark notes may be limited, according to John Spinello, chief fixed-income technical strategist in New York at Jefferies & Co. Ten-year note yields touched a daily low of 4.56 percent yesterday.
To contact the reporter on this story: Deborah Finestone in New York at dfinestone@bloomberg.net
Last Updated: August 28, 2007 12:01 EDT