July 3 (Bloomberg) -- Treasury 10-year notes rose for a third day as investors sought the safest assets after two of Portugal’s ministers resigned from the government, reigniting concern the European debt crisis is worsening.
Thirty-year bonds advanced for a sixth day after Portuguese Foreign Affairs Minister Paulo Portas and finance chief Vitor Gaspar both quit, threatening the stability of the ruling coalition and pushing up the nation’s borrowing costs. Treasuries declined last month after Federal Reserve Chairman Ben S. Bernanke said the central bank may scale back purchases of the securities later this year. Economists say a U.S. report today will show companies stepped up hiring last month.
"What we’re seeing now is political uncertainty once again," said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. "That’s come back on the agenda after the limelight shifted to the Fed in recent weeks. In uncertainty you get back to the safer assets and that’s why Treasuries are benefitting from this situation."
The benchmark 10-year yield fell three basis points, or 0.03 percentage point, to 2.44 percent at 6:50 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent note maturing in May 2023 rose 9/32, or $2.81 per $1,000 face amount, to 94. The 30-year yield also dropped three basis points, to 3.44 percent.
Portuguese Prime Minister Pedro Passos Coelho told voters in a televised speech from Lisbon last night he’ll try to hold his government together after Portas, leader of junior coalition party CDS, quit in protest at the government’s budget policy.
Passos Coelho is battling rising joblessness and a deepening recession as he cuts spending and raises taxes to meet terms of a 78 billion-euro ($101 billion) rescue plan monitored by the European Union, the International Monetary Fund and the European Central Bank.
Treasury 10-year yields have dropped more than 20 basis points since rising to 2.66 percent on June 24, the highest level since August 2011.
The Fed is buying $85 billion of Treasuries and mortgage- backed securities each month to put downward pressure on borrowing costs. Bernanke said on June 19 that policy makers may end purchases next year if the economy achieves the sustainable growth the central bank has sought since the last recession ended in 2009.