TREASURIES-Prices end near flat in choppy trading

NEW YORK | Mon Feb 13, 2012 4:21pm EST

NEW YORK Feb 13 (Reuters) - Treasuries prices were mixed in choppy trading on Monday as investors weighed the impact of austerity in Greece and looked ahead to highly anticipated minutes from the latest Federal Reserve meeting on Wednesday.

Prices were volatile, with the debt initially falling on the news that Greece's lawmakers passed unpopular spending cuts, which helped risk appetite. They then reversed course and gained on rumors that an agreement to restructure Greece's debt would face new delays.

Treasury debt prices then fell again in early afternoon as stocks extended gains, dampening demand for U.S. government bonds. They ended the day little changed.

"I'm not sure what is the good news out of Greece, especially in relation to the euro," said Lou Brien, market strategist at DRW Trading in Chicago. "The euro isn't getting much a bounce off this and if it were to continue to weaken I'm not sure if stocks will be able to hold up or not."

Benchmark 10-year Treasuries notes were last up 2/32 in price to yield 1.98 percent, little changed from Friday. Thirty-year bonds prices rose 8/32 in price to yield 3.1 percent, down from 3.14 percent.

Negotiations over Greece's debt restructuring are set to come to a head on Wednesday, a date Euro zone officials have said marks a cutoff point for an agreement on a new bailout.

Greece must find 14 billion euros ($18.6 billion) to meet debt repayments by March 20 or face the prospect of a chaotic default.

Treasuries prices also fell after the Federal Reserve completed its purchase of $1.81 billion in debt maturing between 2036 and 2041, out of $4.88 billion submitted for purchase.

Fed bond purchases made as part of the central bank's Operation Twist program have been keeping a cap on yields even as data points to an improving economy.

The program, which is scheduled to end in June, involves buying longer-dated debt to try to lower mortgage costs, and funding the purchases through sales of shorter-dated notes.

"The market is kind of trapped in a range," said Richard Gilhooly, interest rate strategist at TD Securities in New York.

This is likely to persist "until you get closer to the end of Twist and the manipulated market," he said. "Then maybe people will be looking beyond the end point."

Investors are now closely anticipating the release on Wednesday of the minutes of the January Federal Reserve meeting for any signs that the central bank expects to launch a further round of quantitative easing.

Traders are also looking for any hints at when the central bank may begin exiting from its easy money policy.

Retail sales data on Tuesday is also expected to show that spending increased by 0.7 percent in January, according to the median of 73 economists polled by Reuters.

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