|Treasuries surged after a $12 billion sale of 30-year bonds drew the strongest demand since November 2007, the last of three auctions this week that each attracted more investors than forecast.|
Thirty-year bonds rallied the most in almost six months as the debt drew a yield of 4.238 percent, the lowest level since March and below the 4.289 percent forecast in a Bloomberg News survey. Yesterday’s $20 billion 10-year sale also drew a lower- than-forecast yield. Demand at the $38 billion three-year offering on Sept. 8 was the strongest since November.
“From a government standpoint, it’s phenomenal because they are borrowing at an inexpensive rate,” said William Larkin, a fixed-income portfolio manager in Salem, Massachusetts at Cabot Money Management, which manages $500 million. “There’s some healthy rising skepticism about the sustainability of the recovery. The weak employment data is creating an allure to longer-dated securities.”
“This was a terrific auction for the Treasury,” wrote Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, in a note to clients. “It’s a combination of a variety of factors. These include a lack of faith in economic recovery and the fact that the Treasury market is one of the few markets large enough and liquid enough to support the volume of liquidity dumped into the global economy.”
....Other parts of the credit markets are benefiting from lower Treasury rates. Yields on Fannie Mae and Freddie Mac mortgage securities declined to the lowest in more than three months, signaling that interest rates on new-home loans will retreat further and bolster the U.S. housing market.
The Fed may keep interest rates low for “many years” to help U.S. consumers and companies as they pare back debt, according to economists at Goldman Sachs Group Inc., one of the 18 primary dealers required to bid at Treasury auctions.
If the recovery crashes, I doubt low interest will boost the housing market that much.