Treasury 10-Year Notes Fall as U.S. Trade Deficit Narrows

(Bloomberg) -- Treasury 10-year notes fell for a third straight day as a government report showed the U.S. trade deficit narrowed more than forecast in December, renewing concern that inflation may accelerate.

Two-year notes yielded the least compared with 10-year debt since 2004 before Federal Reserve Chairman Ben S. Bernanke's economic testimony, in which he may signal the Fed is ready to cut interest rates further to keep the economy from dropping into a recession.

``The Fed is going to be aggressive and proactive, and with that you have to be concerned with inflationary pressures building,'' said Sean Simko, who oversees $8 billion in Oaks, Pennsylvania, at SEI Investments Co. ``Inflationary pressures will be tomorrow's problem, which is going to sell the long part of the curve.''

Ten-year note yields rose 4 basis points, or 0.04 percentage point, to 3.77 percent at 9:48 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 3 1/2 percent security due in February 2018 fell 11/32, or $3.44 per $1,000 face amount, to 97 3/4. Two-year note yields increased 2 basis points to 1.93 percent.

 

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New York's Dinallo Considers Splitting Bond Insurers

(Bloomberg) -- Bond insurers may be split into two pieces to bolster credit ratings and protect municipalities and bondholders, New York's top insurance regulator plans to tell Congress.

One part would operate the profitable municipal bond insurance business, while the other would handle so-called structured finance products, according to testimony prepared for Eric Dinallo, the New York State insurance superintendent. Dinallo is scheduled to address a U.S. congressional committee today.

``Our first priority will be to protect the municipal bondholders and issuers,'' according to Dinallo's testimony. ``We cannot allow the millions of individual Americans who invested in what was a low-risk investment lose money because of subprime excesses. Nor should subprime problems cause taxpayers to unnecessarily pay more to borrow for essential capital projects.''

 

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