Prices steady, investors anticipate policy meetings
NEW YORK (Reuters) - Treasuries prices were little changed on Friday as traders took a break from a recent rally and looked ahead to weekend gatherings of policymakers, the French presidential election and a Federal Reserve meeting next week.
Finance ministers and central bankers from around the globe gather in Washington for the semiannual meetings of the International Monetary Fund and the World Bank, and the Federal Reserve holds a policy meeting on April 24-25.
Benchmark yields are just below the psychologically important level of 2 percent, as recent data pointing to a slowing U.S. recovery and worries over contagion from Europe's debt crisis have underpinned the safe-haven allure of U.S. government debt.
"It is still the same dynamics of growth concerns, European concerns, and everyone is trying to figure out what the Fed is going to make of all this," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
Benchmark 10-year notes traded unchanged in price to yield 1.97 percent, down two basis points on the week. Benchmark yields dropped below 2 percent last week for the first time in nearly a month.
Trade volume was well below average on Friday.
"(The markets) are in a moderate 'risk-on' mode as it seems the IMF is closer to its target of 400 billion in extra emergency funding," said Eaton Vance Investment Managers Vice President and portfolio manager Eric Stein.
The Group of 20 leading industrial and emerging countries pledged more than $430 billion on Friday to bolster the International Monetary Fund's fire-fighting power and ward off financial contagion from Europe.
The agreement would double the IMF's war chest, achieving the target laid out by IMF chief Christine Lagarde at the start of the IMF/World Bank meetings this weekend.
"That funding will be seen as a positive by the risk markets though, as always, the devil will be in the details, and it will be important to analyze any statements out of this weekend's meetings closely," Stein said.
Another reason for bond investors' caution is the Treasury's auctions of two-year, five-year and seven-year notes next week, said Josh Stiles, managing director at IDEA Global in New York.
"People aren't sure if the next wave of safe-haven buying is coming or not, and if not, you have to be careful where you bid," Stiles said. "We've been hugging 2 percent on the 10-year yield all week, and it's hard to get the two-year yield below 25 basis points. We need some kind of 'fear trade' to get through the Treasury supply in a rally mode," he said. "Otherwise, the market needs to pause and pull back a bit."
Sunday's presidential vote in France occurs as another bout of worries about the euro zone is drawing close attention to the euro bloc's No. 2 economy. The vote is the first round of an election that could make Socialist Francois Hollande the country's first left-wing president in 17 years.
"The first round of French elections this Sunday is a big deal, but since it is basically assured that Sarkozy and Hollande will make it to the second round, the big action will be the second round on May 6," he said.
As for next week's Fed meeting, the market will focus very closely "on the minutiae of the statement and the Bernanke press conference happening after this meeting," Stein said.
He said the June Fed policy meeting would be the one at which the central bank could announce some new hybrid of monetary easing since, by then, the Fed will have been able to analyze two more monthly sets of U.S. employment data.
Any decision on further easing "will be data dependent and if the pace of job growth slows over the next two months, as it did this month, I expect the Fed to act," he said.
(Additional reporting by Ellen Freilich; Editing by Dan Grebler)
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