Foreigners boost buys of long-term U.S. securities: Treasury

NEW YORK (Reuters) - Foreigners increased purchases of long-dated U.S. securities, including government bonds, in March, the U.S. Treasury said on Tuesday, but lightened up on short-term assets such as bills.

Overseas investors bought a net $36.19 billion in long-term assets in March, above February's inflow of $10.14 billion. They increased Treasury holdings by $20.47 billion after buying a net $15.35 billion the prior month.

China, the largest foreign U.S. creditor increased its Treasury holdings to $1.170 trillion from a downwardly adjusted total of $1.155 trillion in February. Brazil increased its holdings by $9 billion to $237.4 billion.

"We are struck by the buying from Brazil, which we suspect is about intervention," said David Ader, head of government bond strategy at CRT Capital in Stamford, Connecticut.

Both Brazil and China regularly buy dollars in currency markets to prevent excessive appreciation of their own currencies and stash the money in U.S. government bonds.

Private overseas investors were actually net sellers of Treasuries in March, though they did snap up $2.25 billion of U.S. corporate debt. Official institutions such as central banks were modest net sellers of corporate debt to the tune of $425 million.

Including short-dated assets such as bills, however, foreigners unloaded $49.99 billion overall after having snapped up $92.65 billion in February, down from an initial estimate of $107.67 billion. March's net outflow was the biggest since July.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama & Theodore d'Afflisio)

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Treasury bond market at a glance

Key barometers in the Treasury market late Friday, compared with late Thursday. Price changes in the 10-year note and 30-year bond are per $100 invested:

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1. Bond Buyer index of 40 actively traded municipal bonds.

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Tuesday's Treasury bond market at a glance

Key barometers in the Treasury market late Tuesday, compared with late Monday. Price changes in the 10-year note and 30-year bond are per $100 invested:

___

1. Bond Buyer index of 40 actively traded municipal bonds.

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Treasury announces 3rd round of AIG stock sales

WASHINGTON (AP) -- The Treasury Department announced Friday that it will sell more of its shares of common stock in insurance giant American International Group to recoup more of the support the government provided AIG in what was the biggest bailout of the 2008 financial crisis.

It will be Treasury's third sale of AIG stock. The sale is expected to raise around $6 billion. AIG said it planned to purchase $2 billion of the amount put up for sale. The new offering follows Treasury sales of $5.8 billion in AIG common stock in May 2011 and $6 billion in March of this year. AIG purchased $3 billion of the March offering.

Treasury and the Federal Reserve stepped in with $182 billion to rescue New York-based AIG from collapse. Treasury still owns about 70 percent of AIG's common stock.

Treasury's announcement came a day after AIG announced that its net income, after paying dividends, climbed to $3.2 billion, or $1.71 a share, in the three months ended March 31. That compares to net income of $1.3 billion, or 31 cents a share, in the same period last year.

The AIG gains in the first quarter came from an improved performance at its Chartis and SunAmerica insurance units. The company's aircraft leasing business also posted higher operating income.

Treasury still has an outstanding investment of $35.7 billion in AIG out of the initial $68 billion it provided to keep the company from collapsing. The Treasury support came from the government's $700 billion Troubled Asset Relief Program.

Treasury estimates that the Fed and Treasury together have recouped all but about $44 billion of the initial $182 billion bailout amount.

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Treasury to sell more AIG common stock

By Mark Felsenthal

WASHINGTON (Reuters) - The Treasury Department said on Friday it plans a third sale of the common stock of American International Group (AIG) that it acquired as part of the government bailout of the insurer in 2008, at the height of the financial crisis.

The Treasury said the size and price of the offering are to be determined. Buyers purchased $6 billion of AIG common stock in March and $5.8 billion worth in May 2011.

AIG has said it intends to buy up to $2 billion of the stock sold in the offering, the Treasury Department said in a statement. AIG bought around $3 billion worth of stock in the March sale, a Treasury official said.

The Treasury and the Federal Reserve made $182 billion available to prop up the company, which couldn't meet its credit insurance obligations when housing markets crashed. U.S. authorities retain approximately $44 billion of that investment, a Treasury official said.

The AIG rescue was the largest U.S. government bailout of a private company in history.

Bank of America Merrill Lynch (BAC) , Citigroup (C), Credit Suisse, Deutsche Bank (DBK.DE), Goldman Sachs (GS), J.P. Morgan (JPM) and Morgan Stanley (MS) have been hired as bookrunners for the offering, Treasury said.

Treasury said last month it expects that many of the financial crisis programs it and other banking authorities implemented will end up making a profit for taxpayers.

(Reporting by Mark Felsenthal; Editing by Bernard Orr and Tim Dobbyn)

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Thursday's Treasury bond market at a glance

Key barometers in the Treasury market late Thursday, compared with late Wednesday. Price changes in the 10-year note and 30-year bond are per $100 invested:

___

1. Bond Buyer index of 40 actively traded municipal bonds.

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Friday's Treasury bond market at a glance

Key barometers in the Treasury market late Friday, compared with late Thursday. Price changes in the 10-year note and 30-year bond are per $100 invested:

___

1. Bond Buyer index of 40 actively traded municipal bonds.

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Rates on Treasury bills mixed at weekly auction

WASHINGTON (AP) -- Interest rates on short-term Treasury bills were mixed in Monday's auction with rates on three-month bills unchanged while rates on six-month bills dropped to their lowest point since February.

The Treasury Department auctioned $30 billion in three-month bills at a discount rate of 0.080 percent, the same as last week. Another $28 billion in six-month bills was auctioned at a discount rate of 0.130 percent, down from 0.135 percent last week.

The three-month rate matched last week's rate, which was the lowest since April 2 when three-month bills averaged 0.075 percent. The six-month rate was the lowest since those bills averaged 0.125 percent on Feb. 21.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,997.98 while a six-month bill sold for $9,993.43. That would equal an annualized rate of 0.081 percent for the three-month bills and 0.132 percent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, was unchanged at 0.18 percent last week, the same as the previous week.

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Treasury weighs sale of money-losing bonds

Would you pay more for a Treasury security than it's worth?

The U.S. Treasury Department is betting yes. And it's mulling an odd idea -- whether to begin offering securities on the primary market at negative yields. For example, an investor might pay $1,010 for a $1,000 Treasury bill. The result: Investors get back less money than their original investment when they hold the Treasury to maturity.

The Treasury Department plans to make its final decision by May.

Why is the government considering this far-fetched tactic? Treasuries already have sold at negative yields on the secondary market, where investors buy and sell securities with other investors. But currently, the government can't sell its own negative-yielding bonds in primary markets.

The result: The Treasury is leaving money on the table, says Paul Jacobs, a Certified Financial Planner at Palisades Hudson Financial Group in Atlanta.

That's why the Treasury is considering the sale of negative-yielding securities. The government would be paid by investors to finance the massive government debt -- $15.7 trillion in mid-April.

"Negative yields are a smart way for the Treasury to be borrowing," adds Brian Evans, founder of Everett, Wash.-based Madrona Funds, which offers exchange-traded funds.

Negative-yielding securities are nothing new. On the heels of the financial crisis in 2008, bond yields in the secondary market dipped into negative territory, and they've returned there off and on.

"Negative yields are a sign of the times," says Aaron Smith, a senior economist at Moody's Analytics. "People want to park money in Treasuries and have quick access."

There's usually demand when people are fearful, Evans says. Last year, skittish investors returned to Treasuries, even negative-yielding bonds, as they fled European investments.

But beware of being driven by fear when investing, Evans says. A negative-yielding bond has no possibility of upside and lots of downside, he says. "You're guaranteed to lose principal and not keep pace with inflation," Evans says.

For example, if interest rates rise, your Treasury security could sink even further into the red on the secondary market.

There are better choices. Besides Treasuries, money already is flocking to short-term investments, says Donald Cummings, founder of Blue Haven Capital in Geneva, Ill. The reason: Investors are overly worried about rising interest rates, he says. Staying on the short end of the maturity curve helps avoid losses because bond prices decline when interest rates rise.

Before parking your money, consider your liquidity needs, Cummings says. Bank CDs and money market accounts are usually safe -- and sometimes higher-yielding -- alternatives to Treasuries, and they're insured up to $250,000 per depositor. Meanwhile, three-month Treasuries were yielding only 0.09 percent as of mid-April.

Be sure to avoid investing in long-term Treasury bonds, Jacobs says. These bonds can tie up your money in low-yielding investments when interest rates start rising again.

As for negative-yielding securities, put them at the bottom of your list, Evans says.

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Wednesday's Treasury bond market at a glance

Key barometers in the Treasury market late Wednesday, compared with late Tuesday. Price changes in the 10-year note and 30-year bond are per $100 invested:

___

1. Bond Buyer index of 40 actively traded municipal bonds.

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Rates decline at Treasury bill auction

WASHINGTON (AP) -- Interest rates on short-term Treasury bills fell in Monday's auction with rates on six-month bills dropping to the lowest level since early March.

The Treasury Department auctioned $30 billion in three-month bills at a discount rate of 0.080 percent, down from 0.085 percent last week. Another $28 billion in six-month bills was auctioned at a discount rate of 0.135 percent, down from 0.150 percent last week.

The three-month rate was the lowest since three-month bills averaged 0.075 percent on April 2. The six-month rate was the lowest since those bills averaged 0.130 percent on March 5.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,997.98 while a six-month bill sold for $9,993.18. That would equal an annualized rate of 0.081 percent for the three-month bills and 0.137 percent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, edged down to 0.18 percent last week from 0.19 percent the previous week.

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Monday's Treasury bond market at a glance

Key barometers in the Treasury market late Monday, compared with late Friday. Price changes in the 10-year note and 30-year bond are per $100 invested:

___

1. Bond Buyer index of 40 actively traded municipal bonds.

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Treasury bills rates increase at weekly auction

WASHINGTON (AP) -- Interest rates on short-term Treasury bills rose in Monday's auction with rates on three-month bills climbing to the highest level in three weeks.

The Treasury Department auctioned $31 billion in three-month bills at a discount rate of 0.085 percent, up from 0.075 percent last week. Another $29 billion in six-month bills was auctioned at a discount rate of 0.150 percent, up from 0.140 percent last week.

The three-month rate was the highest since these bills averaged 0.095 percent on March 19. The six-month rate was the highest since these bills averaged 0.170 percent on March 28.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,997.85 while a six-month bill sold for $9,992.42. That would equal an annualized rate of 0.086 percent for the three-month bills and 0.152 percent for the six-month bills.

Separately, the Federal Reserve said Monday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, edged up to 0.19 percent last week from 0.18 percent the previous week.

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U.S. Treasury yields steady before this week's supply

LONDON (Reuters) -Treasury yields were broadly steady on Tuesday as the prospect of supply this week offset a boost in demand for Treasuries from weaker-than-expected jobs data.

U.S. 10-year government bond yields were flat at 2.05 percent and 30-year yields were little changed at 3.20 percent with the U.S. Treasury scheduled to sell 10-year notes on Wednesday and 30-year paper on Thursday.

"You have got supply, so if anything that supply is going to weigh on the market. It's real duration that is coming into this market," said a trader.

At 2.05 percent, 10-year yields still hovered close to four-week lows hit on Monday. Yields fell as far as 2.019 percent that day after U.S. jobs data came in below expectations last week, casting doubt over the strength of the U.S. economic recovery.

Friday's U.S. non-farm payrolls report showed just 120,000 jobs were added during March, far below the market's median expectation of 203,000 and helping to revive speculation of further quantitative easing by the Federal Reserve. Treasuries did not fully react to the data last week as the market was only open for half a day during the Good Friday holiday.

Societe Generale expected the 10-year Treasury yield to break below the 2.019/2.031 percent support area and decline to at least the tentative rising support line coming at 1.851 percent.

But others in the market said yields could remain around current levels until they get further evidence of economic weakness or additional insight into the Fed's thinking on more monetary stimulus.

"Markets had become maybe a bit too optimistic and had written off more monetary easing too early," Philip Marey, strategist at Rabobank said. "If we get a couple of bad non-farm payrolls in a row, I think it would be interesting for the Fed to start sterilized asset purchases."

Dallas Fed President Richard Fisher, an outspoken policy hawk, told Reuters in March he had not heard U.S. monetary policymakers discuss the possible introduction of a "sterilized" bond-buying program, where it seeks to counter any inflationary impact, as was suggested by a report in the Wall Street Journal that month.

Before the jobs data, market participants had interpreted recent Fed comments and improved data to mean the bar for further monetary stimulus was extremely high.

(Reporting by Ana Nicolaci da Costa; Editing by Ruth Pitchford)

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Monday's Treasury bond market at a glance

Key barometers in the Treasury market late Monday, compared with Friday. Trading closed at noon on that day for the Good Friday holiday. Price changes in the 10-year note and 30-year bond are per $100 invested:

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1. Bond Buyer index of 40 actively traded municipal bonds.

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Calendar lists only Treasury auctions

Jobs Pose Challenge S&P 500 Has Overcome Nine TimesBloomberg

U.S. employment growth that trailed economists' forecasts in March presents a challenge that stocks have overcome …

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Friday's Treasury bond market at a glance

Key barometers in the Treasury market late Friday, compared with late Thursday. Trading closed at noon Eastern for the Good Friday holiday. Price changes in the 10-year note and 30-year bond are per $100 invested:

___

___ (1)Bond Buyer index of 40 actively traded municipal bonds.

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Dismal jobs report pushes up Treasury prices

Treasury prices shot higher Friday after a weak jobs report.

The yield on the benchmark 10-year Treasury note fell to 2.06 percent after the Labor Department released its monthly employment survey. The yield was 2.18 percent late Thursday. The price of the note jumped $1.13 for every $100 invested.

Bond yields fall when their prices rise. That means more people are trying to buy the bonds, which are less risky than stocks and commodities. Investors tend to pile into Treasurys when they're worried about the economy.

Treasury yields also fell Wednesday and Thursday as traders worried that Spain could become the next European country to run into trouble with its debts.

The government said 120,000 net jobs were created in the U.S. last month, far fewer than analysts were expecting and down from more than 200,000 in each of the three previous months. The unemployment rate edged down to 8.2 percent from 8.3 percent, but mostly because more people stopped looking for work

Bond trading closed at noon Eastern for the Good Friday holiday. Stock and commodities trading were closed. Stock index futures fell sharply in the 45 minutes trading was open after the jobs report came out. Standard & Poor's 500 index futures fell 1.1 percent in the abbreviated session.

In other bond trading, the yield on the 30-year Treasury bond fell to 3.22 percent from 3.32 percent late Thursday. Its price jumped $2.03 per $100 invested. The yield on the two-year note fell to 0.32 percent from 0.35 percent.

The yield on the three-month T-bill was 0.07 percent.

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Treasury freezes pay for CEOs at Ally Financial, GM, AIG

WASHINGTON (Reuters) - The chief executives of General Motors , AIG, and Ally Financial had their 2012 compensation packages frozen for a second year in a row by the Treasury Department after they got "exceptional" bailout help during the financial crisis.

The Treasury said on Friday that all three were making progress at repaying the taxpayer funds given to them to keep them from collapsing during the 2007-2009 financial crisis but their pay practices remain under scrutiny of a "special master" until they do pay it back.

The top executives get a mix of cash, stock and stock options that together make up their overall pay packets.

"Although there has been some modification in the mix of stock, salary and long-term restricted stock for the CEO group, the overall amount of CEO compensation is frozen at 2011 levels," Treasury said.

The government pumped $68 billion into AIG from the Troubled Asset Relief Program, or TARP, and invested $50 billion in GM and $17 billion in Ally Financial to save them from collapse during the 2007-2009 crisis.

The Treasury also said total direct compensation during 2012 for 69 other senior executives at the three firms was being cut by 10 percent from 2011 levels.

The three were part of group of seven firms that got so-called exceptional assistance in the form of taxpayer-financed bailouts during the financial crisis. Four of the original seven -- Bank of America, Citigroup, Chrysler Financial and Chrysler -- have already repaid their TARP money and left the program.

Public anger over high pay and huge bonuses at bailed-out firms was so high that the Obama administration created a "special master's office" to monitor pay practices.

The Treasury report on Friday does not name any of the executives but it is evident the three CEOs still will get pay that puts them among the elite of American income earners.

The top executive at AIG will receive total direct compensation, which includes cash, stock and future stock options worth $10.5 million, while Ally Financial's leader will get $9.5 million and GM's chief executive $9 million, according to documents distributed by the Treasury.

The chief executive officer of AIG is Robert Benmosche, GM's CEO is Daniel Akerson and Ally Financial's is Michael Carpenter, although their names do not appear in any of the documents that Treasury released.

A spokesperson for Ally Financial said its executive pay "continues to be in line with the stated guidelines for TARP companies" and said its management team was focused on repaying the remaining TARP funds to Treasury.

The other 69 executives are among the three firms' senior executive officers as well as the most highly compensated employees who work under them.

The Treasury said the three firms are making progress in repaying their taxpayer funds. It said AIG has reduced its obligations to the U.S. government by more than 75 percent, while Treasury has recovered nearly half the TARP funds it put into GM and close to one-third of the money that went to Ally Financial.

(Reporting by Glenn Somerville; Editing by Neil Stempleman and Lisa Shumaker; Additional reporting by Ilaina Jonas and Antonella Ciancio in New York)

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