U.S. sells debt with a negative yield for 1st time

NEW YORK (Reuters) – The U.S. Treasury Department steady Monday sold securities that fetched a negative yield for the pristine time, implying investors are willing to pay the government to be in possession of its debt.

This is a milestone in the current rock-fundament interest rate environment, as the Federal Reserve is widely expected next week to announce it will buy more Treasuries to jump-begin a sluggish economy.

Typically, investors buy a new Treasury bond at “equality” or 0. At Monday’s billion auction of five-year Treasury Inflation-Protected Securities (TIPS), they paid greater degree than 5 and accepted a bond that yields nothing even from factoring in a 0.50 percent semi-annual interest payment.

“This shows negative yields are not a propensity-off to investors,” said Michael Pond, co-head of U.S. rates generalship with Barclays Capital in New York.

But some analysts cautioned negative yields, whether or not they persist, could hurt TIPS demand.

“If issuing TIPS in a negative substantive rate environment requires zero coupons and up-front premium, we can see that becoming an issue,” said George Goncalves, head of U.S. rates strategies at Nomura Securities International in New York.

While a negative yield clearly benefits the treaty government by lowering its borrowing cost, investors bought the five-year TIPS, which was originally issued in April, on expectations that the Fed force of ~ succeed with another round of policy accommodation, dubbed ‘QE2,” analysts uttered.

If QE2 can raise inflation toward to 2 percent, a take aim which Fed Chairman Ben Bernanke recently cited, investors will profit from a widening in the yield gaps betwixt TIPS and regular Treasuries. This could happen even if the substantial yields on TIPS remain negative, analysts said.

The five-year TIPS “breakevens” was endure quoted at 1.68 percent on Monday, compared with 1.25 percent in late August.

The Treasury will sell billion in two-year notes ~ward Tuesday, part of this week’s 9 billion coupon-yielding fruit supply.

The Treasury has been borrowing cheaply since the Fed brought lacking-term rates down near zero since December 2008.

It has sold bills at zero percent during episodes of safe-haven stampedes during the global credit critical juncture.

In the open market, five-year and other short-dated TIPS turned negative in tardy September on bets that increased bond purchases from the Fed command push down real interest rates, or borrowing costs excluding inflation.

Fed worldly wisdom-makers have expressed worries over the threat of deflation, where a crippling period of falling prices and real interest rates could inflict long-designate damage to an economy like Japan in the 1990s.

If it engages in more distant quantitative easing in the form of buying more bonds, the Fed hopes to sneer out deflation risk and inflate higher asset prices. Rising asset values could in science encourage investments and spending and in turn bolster economic activity to to a greater degree desirable level.

(Editing by James Dalgleish

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Existing home sales rise, supply edges down

http://www.nathanhamm.net/news/existing-home-sales-rise-supply-edges-down/ http://www.nathanhamm.clear/news/existing-home-sales-rise-supply-edges-down/#comments Wed, 27 Oct 2010 10:11:58 +0000 Nathan Hamm News the floor edges Existing home rise sales supply http://www.nathanhamm.net/advice/existing-home-sales-rise-supply-edges-down/ WASHINGTON (Reuters) – Sales of previously owned U.S. homes rose a greater-than-expected 10 percent in September ~-end remained at depressed levels that point to a painful and protracted restoration for the housing market. The rise took sales to an yearly … Continue reading →

WASHINGTON (Reuters) – Sales of previously owned U.S. homes rose a greater-than-expected 10 percent in September however remained at depressed levels that point to a painful and protracted recruiting for the housing market.

The rise took sales to an year-book rate of 4.53 million units, the National Association of Realtors said on Monday. It was the second monthly gain and far outstripped economists’ expectations during an increase to a 4.30 million-unit pace.

Still, the premises did little to weaken the case for further monetary easing from the Federal Reserve, by sales far below the 5 million-unit pace usually associated through a healthy market.

“This is relatively goods news but the protection market situation has a long way to go before it fully recovers,” said Chris Christopher, a senior economist at IHS Global Insight in Lexington, Massachusetts.

The record had little impact on U.S. financial markets as investors continued to front ahead to the November 2-3 Fed meeting at which officials are expected to decide to inject more money into the economy through bond purchases to drive borrowing costs grow less and stimulate demand.

Expectations of further Fed easing pushed the U.S. dollar to a new 15-year low against the yen and weakened it against ~ly major currencies. Stocks on Wall Street rose to a 5-1/2 month ostentatious as traders anticipated a looser monetary policy and piled into riskier effects.

Prices of U.S. government debt drifted mostly lower as traders booked profits from a quiz early in the session.

STABILITY AT LOW LEVELS

The Fed divide overnight interest rates to near zero in December 2008 and has before that time bought about .7 trillion worth of Treasury and mortgage-related offence. That helped push mortgage rates to historic low levels.

The covering market is showing signs of having bottomed after hefty declines in the after-crop of the end of a popular tax credit for home buyers earlier this year.

Activity, in whatever manner, remains very subdued and the recovery is expected to be excessively slow given the 9.6 percent U.S. unemployment rate. A vapor of uncertainty from investigations into the processing of foreclosures by some banks looms over the sector, which was at the heart of the 2007-2009 recession.

Last month, foreclosed properties accounted in quest of 23 percent of sales while short sales made up 12 percent. The combined percentage was up superficially from August. First-time buyers accounted for 32 percent of transactions in September.

There are concerns the foreclosure inquisition could slow the housing market correction as banks hold back forward sales. According to the NAR, foreclosed properties constitute about 20 percent of homes in successi~ the market.

The industry group said a survey of its members taken sum of ~ units weeks ago showed buyers were becoming hesitant to snap up foreclosed properties, worried they might not be dealing with the lawful owner.

Sales of single-family homes and condominiums both rose, the report showed. A 1.9 percent sink in the supply of houses available for sale to 4.04 million units also offered a sign of increased stability in the market.