Treasuries Advance on Speculation Consumer Prices Are Cooling

Nov. 16 (Bloomberg) -- Treasuries fluctuated before a report forecast to show U.S. consumer prices were little changed last month and as the European Central Bank was said to buy Italian and Spanish bonds to cap yields.

U.S. debt pared gains German Chancellor Angela Merkel said Germany is prepared to cede some national sovereignty to the European Union to achieve closer economic and political ties. Mario Monti will act as finance minister in the new Italian government he is heading.

“Inflation data may help to underpin demand for Treasuries, but risk sentiment is the biggest driver at the moment,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. “People are concerned about the euro-zone debt crisis.”

Yields on 10-year notes fell one basis point, or 0.01 percentage point, to 2.04 percent at 7:41 a.m. in New York, according to Bloomberg Bond Trader prices. The 2 percent securities maturing in November 2021 increased 3/32, or 94 cents per $1,000 face amount, to 99 22/32.

The U.S. consumer-price index didn’t climb for the first time in four months after rising 0.3 percent in September, according to the median forecast of 86 economists in a Bloomberg News survey before today’s Labor Department report.

Producer prices fell in October by the most in four months as the cost of energy and automobiles decreased, Labor Department figures showed yesterday.

Yield Outlook

“We expect any moves higher in yields to be relatively shallow and believe there is scope for 10 years to retest and ultimately break below the 1 3/4 level,” Dominic Konstam, the global head of rates research at Deutsche Bank AG in New York, wrote in a report published yesterday. “The curve is biased to flatten bullishly in our view.”

The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of the outlook for consumer prices over the life of the debt known as the break-even rate, has narrowed to 2.01 percentage points from a 2011 high of 2.67 in April.

Advance America Cash Advance Centers, Inc.

Snapshot Report ) has seen big gains over the last six months, almost doubling in price after recently topping off just shy of $9. With another great quarter in hand and a bullish growth projection, this Zacks #1 Rank stock is a leader in momentum.

Company Description

Advance America, Cash Advance Centers, Inc. provides cash advance services in the United States, the United Kingdom, and Canada. The company was founded in 1997 and has a market cap of $534 million.

Shares of AEA have been racing higher for the last six months as earnings continue to accelerate in the weak economy. That was on display when the company reported strong Q3 results in late October that came in ahead of expectations.

Third-Quarter Results

Revenue for the period was up 3% from last year to $159 million. Earnings also looked good, coming in at 24 cents, 14% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 20% over the last four quarters.

The company also declared a nice quarterly dividend of .0625 cents, which equates to an annual dividend yield of 3%.

Financial Profile

Advance's financial profile was also on the upswing, with cash and equivalents up $9 million to $36 million while long-term debt fell $500,000 to just $3.2 million.

Estimates

We saw some decent movement in estimates off the good quarter, with the current year adding 3 cents to 95 cents. The next-year estimate is pegged at $1.12, a bullish 18% growth projection.

Valuation

With a PEG ratio of .5, TTM trades at a sharp discount to the benchmark of 1 for value.

2-Year Chart

On the chart, shares have seen big gains in the last 6 months, hitting a new all-time high in July before pulling back with the market. Take a look below.

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