TREASURIES-Bond prices rise as global growth fears come to fore

Tue Oct 9, 2012 3:01pm EDT

Related Topics

* Growth, Greece worries stoke safety bids for bonds
    * U.S. sells $32 bln in 3-year note supply
    * Fed buys $1.89 billion in long-dated debt
    * Long bond yield dips below 200-day moving average


    By Richard Leong
    NEW YORK, Oct 9 (Reuters) - U.S. Treasuries prices advanced
on Tuesday as investors, worried about bleak views of global
growth and the upcoming earnings season, dumped riskier assets
to pour money into safe havens.
    The International Monetary Fund, one of Greece's main
lenders, said in a report on Tuesday that Athens would miss the
five-year debt reduction target that is a condition for the
country's 130 billion euro bailout. 
    The group also warned the United States faces meager growth
of about 2.0 percent this year and in 2013 and predicted a 0.4
percent contraction in the euro zone this year. It also
downgraded its outlook on China, the world's second-largest
economy.
    The IMF outlook "was adding to the downbeat sentiment. It
was a confirmation of slow growth globally," said Gennadiy
Goldberg, an interest rate strategist with TD Securities in New
York. "That's why we are setting back into this trading range."
    Key U.S. stock indexes also dropped as investors awaited
what many fear could be a disappointing earnings season.
    "Earnings season is under way, and it does not bode to be
particularly good," said David Ader, head of government bond
strategy at CRT Capital Group in Stamford, Connecticut.
    "I'd like to see whether that takes the edge off stocks and
other risk assets," he added.
    Thomson Reuters data through Friday showed 90 companies in
the S&P 500 have lowered outlooks versus 21 raised outlooks. The
resulting ratio of negative to positive outlooks of 4.3 is the
weakest showing since the third quarter of 2001. 
    The concerns about Greece and global growth overshadowed
Friday's government report that the U.S. jobless rate fell in
September to 7.8 percent, the lowest level since January 2009.
The lower jobless rate and other surprisingly upbeat aspects of
the Labor Department's September payroll report led to a
sell-off in Treasuries on Friday and pushed benchmark yields to
their highest levels in about two weeks.   
 
    The U.S. bond market was closed on Monday for to the
Columbus Day holiday.
    Safe-haven appetite for Treasuries was mitigated by some
selling by bond dealers in anticipation of this week's $66
billion in coupon supply.
    In addition, the Treasury Department sold $32 billion in
three-year notes on Tuesday at a high yield of 0.346 percent.
 
    The Treasury Department will sell $21 billion in 10-year
debt on Wednesday and $13 billion in 30-year bonds on Thursday.
    In addition, the Federal Reserve resumed transactions under
its Operation Twist program, which involves selling
shorter-dated Treasuries and purchasing longer-dated issues in a
bid to hold down long-term borrowing costs to help the economy.
It bought $1.89 billion in Treasuries due in February 2036 to
August 2042. 
    Fed Vice Chairwoman Janet Yellen was scheduled to speak at
8:30 p.m. (0030 GMT) about sovereign risk and financial markets
at an event sponsored by the IMF and the Japanese Ministry of
Finance.
    "The market is struggling with a lot of moving parts," said
Robert Tipp, chief investment strategist with Prudential Fixed
Income in Newark, New Jersey. "At the end of the day, we'll be
in a pretty tight trading range."
    On the open market, benchmark 10-year notes were
up 06/32 in price to yield 1.713 percent, down from 1.748
percent late on Friday, the highest level since Sept 24. 
    Thirty-year bonds rose 25/32 in price to yield
2.930 percent, down from Friday's close of 2.9703. The 30-year
yield slipped below its 200-day moving average of 2.939 percent,
according to Reuters data.
    Wall Street stocks fell, with the Standard & Poor's 500
index 0.77 percent lower. Traders will focus on the
earnings of Dow component Alcoa after the market close.
Analysts expect the aluminum producer broke even in the third
quarter.
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