TREASURIES-Fiscal cliff, euro zone concerns lift U.S. bonds

LONDON Fri Nov 9, 2012 6:42am EST

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LONDON Nov 9 (Reuters) - Prices for U.S. Treasuries rose on Friday, extending this week's gains as concern over a looming fiscal crisis and the euro zone's debt problems spurred demand for safe-haven bonds.

* Treasuries have rallied following President Barack Obama's re-election this week as market focus turns to the country's looming "fiscal cliff". Investors fear the White House and the Republican-dominated Congress will not be able to mitigate the potential damage of a $600 billion package of automatic tax hikes and spending cuts due to take effect early next year.

* U.S. T-note futures were last up 9/32 at 134-4/32 while benchmark 10-year yields were down 3 basis points at 1.59 percent.

* The 10-year yield is down about 10 bps for the week on the renewed flight to quality, helped too by uncertainty over when international lenders might decide to release the next tranche of aid to Greece to enable it to avert bankruptcy.

* "Weaker equities, wider (euro zone) peripherals (bond yield spreads) and the poor outlook for Europe and the fiscal cliff concerns are all helping out the Treasury market rally," a trader said.

* "Everyone's mind is focused on the outlook on the fiscal cliff ... and in the absence of any resolution the market is going to rally. We're watching the 1.55 percent level in 10s and if we get to that, we set ourselves up for 1.50."

* The 10-year yield dropped below 1.5 percent earlier this year, but only briefly. It poked below that threshold in early June and again in July and August, hitting a record low of near 1.38 percent in late July, when worries about the euro zone's debt crisis intensified.

* Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said levels around 1.50 percent would seem pretty low when taking into account the U.S. economy's potential growth rate.

* The 30-year T-bond yielded 2.73 percent, 4.4 bps lower than in late New York levels. The renewed safety bid saw strong demand at a sale of 30-year bonds on Thursday, the final refunding auction of the week.

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