Treasuries Set for Worst Year Since 1978 as U.S. Steps Up Sales

Treasuries headed for the worst year since at least 1978, as the U.S. stepped up debt sales to help spur growth in an economy recovering from its deepest recession in six decades.

U.S. bonds were little changed on the day before today’s sale of $32 billion in seven-year debt, the last of three auctions this week totaling $118 billion. The Treasury sold a record-tying $42 billion of five-year securities yesterday and $44 billion in two-year notes on Dec. 28. U.S. government securities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, the worst annual performance since at least 1978, when Merrill began collecting the data.

“This is the largest expansion of fiscal deficit in a single year other than in wartime and depression,” prompting the large loss in Treasuries, said Christian Carrillo, a senior interest-rate strategist at Societe Generale SA in Tokyo. “There is genuine expectation of economic recovery and eventual monetary tightening priced in. It could have been a lot worse.” (more)