Treasuries fall amid deficit predictions

Date: Monday 01 Feb 2010

US treasuries fell back after President Obama’s budget proposal projected the deficit will reach a record $1.6trn this year.

The fiscal 2011 budget emphasises creating jobs with an additional $100bn in stimulus spending. The fiscal deficit should rise to $1.6bn this year from $1.4trn in 2009, according to the forecasts.

Treasuries were on the back foot yesterday as better than expected fourth quarter growth figures sent traders in search of more adventurous investments.

The yield on a 10-year treasury today climbed seven basis points to 3.65%.

Here, gilts were flat as equities advanced amid mixed economic news.

Poor weather coupled with the normal seasonal downturn reduced the number of mortgages approved for the first time in 12 months in December.

On the plus side, UK manufacturing output reached a 15-year high in January as export orders surged and employment increased, lifting hopes that the UK is undergoing a sustained recovery.

The yield on a 10-year gilt fell one basis point to 3.91%.

Mainland European bonds also edged higher, with the yield on Germany’s benchmark 10-year bund falling one basis point to 3.19%.

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