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April 30, 2014 at 11:30 AM
(Bloomberg) — Treasuries headed for a gain this month, a fifth straight April rally, before a government report economists said will show U.S. gross-domestic-product growth slowed in the first quarter.
April is the only month that currently has such a long winning streak. Thirty-year bonds led the advance on speculation inflation will stay below the Federal Reserve’s target, while unrest in Ukraine increased demand for the relative safety of bonds. The Fed will probably continue to cut its bond-purchase program when it finishes a meeting today, based on a Bloomberg News survey of economists.
“Inflation is subdued,” said Hajime Nagata, a portfolio manager in Tokyo at Diam Co., which has the equivalent of $115 billion in assets. “Investors who are expecting a pickup in the economy after winter snowstorms may be too optimistic. The odds of yields falling are greater than the odds of yields rising.”
Benchmark 10-year yields were little changed at 2.69 percent as of 7:01 a.m. in London, based on Bloomberg Bond Trader prices. The price of the 2.75 percent security due in February 2024 was 100 17/32.
Ten-year yields increased 1/2 basis point in Japan to 0.62 percent. Yields rose one basis point in Australia to 3.95 percent. A basis point is 0.01 percentage point.
April gains
The Bloomberg U.S. Treasury Bond Index rose 0.4 percent this month. Treasuries have gained 1.1 percent in April on average since 2010, based on the index. Reasons ranged from slowing economic growth to the European debt crisis to Fed purchases of U.S. government debt.
Diam extended the duration of its Treasury holdings two weeks ago by buying five-year notes, Nagata said. Market volatility has been low and will probably stay that way, which creates an opportunity to capture higher yields by buying longer maturities, he said.
It also makes the “roll down” strategy more attractive, he said. As a bond approaches maturity or “rolls down,” it is valued at successively lower yields and higher prices.
