Treasuries drop after Obama speech

By Shiyin Chen

Bloomberg·

9 Sep, 2011 05:30 PM3 mins to read

Treasuries declined, while Standard & Poor's 500 Index futures gained after President Barack Obama detailed his US$447 billion ($535 billion) plan to boost hiring in the US.

Asian stocks erased early losses, the Australian and New Zealand dollars strengthened, while gold retreated.

Ten-year yields climbed three basis points to 2.01 per cent in Tokyo. S&P 500 futures rallied 0.5 per cent, after earlier sliding as much as 0.6 per cent. The MSCI Asia Pacific Index rose 0.3 per cent, wiping out a drop of as much as 0.5 per cent.

The aussie gained 0.5 per cent and the kiwi climbed 0.6 per cent against the dollar, paring the US currency's weekly gain.

Obama called on Congress to pass his package after jobs growth stalled last month, fuelling concern the US recovery was faltering. European Central Bank president Jean-Claude Trichet said "downside risks" for the region's economies have risen.

Ministers from the Group of Seven nations will meet amid mounting bets on a Greek default.

"The headline number was better than expected but it comes down to how he's going to fund it and how soon the plan will be implemented," said Khiem Do, head of multi-asset strategy at Baring Asset Management.

Longer-maturity bonds led losses after Obama detailed his jobs package, which includes infrastructure spending, subsidies to local governments to stem teacher layoffs and halving payroll taxes paid by workers and small-business owners. Tax cuts account for more than half the dollar value of the stimulus.

The Treasury Department will sell US$66 billion in three-year, 10-year and 30-year debt next week.

"Overall, it's a net positive for equity markets," said Brian Jacobsen, of Wells Fargo Advantage Funds in Wisconsin. Still, the proposal "will be subject to amendments. As there's so much uncertainty as to what the final product will be, it's difficult to game this from an investment perspective," he said.

Gains in futures were capped after the US Department of Homeland Security said it has "specific, credible but unconfirmed threat information" as the 10th anniversary of the September 11 terrorist attacks nears.

About five shares gained for every four that declined on MSCI's Asia Pacific Index, which is headed for a 1.7 per cent weekly loss. Japan's Nikkei 225 Stock Average added 0.1 per cent, while Australia's S&P/ASX 200 Index rose 0.5 per cent.