Fixed Income Sector Experiences Mixed News

Even though the U.S has experienced a gain in everything from manufacturing to consumer confidence and jobs, traders are still not eager to give up treasury investments. Benchmark 10-year yields are set to increase to 2.6 percent by the end of 2012, an increase from 1.88 in 2011 as growth beings to accelerate. It is still clear to many investors that Europe’s debt crisis will continue to fuel demand for safety and containing yields, regardless of the U.S economy improving. Bonds fell in the first week of January due to the increase in manufacturing that was experienced in December 2011, which was the fast growth experienced in six months. 10-year yields increased to 1.96 percent. Overall, U.S government securities returned 9.79 percent on average in 2011.

German two-year notes experienced a rise, pushing yields to record lows after a meeting between the German Chancellor and the French President failed to conclude any measure to resolving the debt crisis. Germany auctioned 3.9 billion Euros of six-month bills at a negative yield for the first time as investors continue to look at safe havens. The nation’s two-year yield slipped a further two basis points to 0.14 after a previous decline of 0.135 percent. Germany’s 10-year yield stayed relatively stable at 1.85 percent.

Greek two-year yields also climbed to a record after concerns that the nation’s write-down deal with private sectors will not work. The two-year note increased by 41 percent points to 176 percent. French 10-year bonds gained after yields fell to 3.31 percent. Italian 10-year bond yields fell six basis points to 7 percent in the last week of December. Rising bond yields from the Netherlands to Finland and Austria suggest European officials are struggling to convince investors they can stem the crisis.