TREASURIES-Bonds buoyed by concern about U.S., Europe economies

Tue Nov 13, 2012 11:21am EST

Related Topics

* Investors turn to lower risk assets in worries over U.S.
fiscal cliff
    * Greek debt woes reignite concern over Europe debt crisis
    * Benchmark yields touch lowest in 10 weeks

    By Chris Reese
    NEW YORK, Nov 13 (Reuters) - U.S. Treasury debt prices rose
on Tuesday with safe-haven buying spurred by concern about a
delay in payment of aid to debt-laden Greece, souring German
investor sentiment and a potential U.S. fiscal crisis.
    Treasuries extended last week's gains, which followed
President Barack Obama's re-election, as investors fretted about
political brinkmanship by Democrats and Republicans over the
"fiscal cliff" - $600 billion in spending cuts and tax hikes due
to come into effect early next year which could send the economy
back into recession.
    U.S. lawmakers have seven weeks to hammer out a compromise
to avoid the fiscal cliff.
    Greece is also at the forefront of investors' minds again. A
euro-zone finance ministers' meeting on Monday gave Athens two
more years to make cuts demanded of it, but held off disbursing
more aid as the euro zone and IMF clashed over a longer-term
target date to shrink the country's debt pile. 
    The risk-on mood was also supported by data showing analyst
and investor sentiment unexpectedly fell in Germany, Europe's
largest economy, in November. 
    "You are seeing a combination of U.S. fiscal cliff worries,
the recent erosion on Wall Street, and then the resumption of
these euro-zone concerns," said Kim Rupert, managing director of
global fixed-income analysis at Action Economics LLC in San
Francisco. 
    The benchmark 10-year Treasury note gained 4/32 
in price to yield 1.60 percent, down from 1.61 percent late
Friday. The yield touched 1.57 percent on Tuesday, marking the
lowest in 10 weeks.
    There was no U.S. trading of Treasuries on Monday due to the
Veterans Day holiday.
    The 30-year Treasury bond rose 8/32 in price to
yield 2.73 percent, down from 2.75 percent late Friday.
    President Obama on Friday invited congressional leaders to
the White House to start negotiating a deal on the fiscal cliff,
vowing to veto any bill that would extend tax cuts for the top 2
percent of wage earners. Investors are worried the United States
will be plunged back into recession if the spending cuts and tax
increases are allowed to go into effect. 
    While Kevin Giddis, managing director of fixed income at
Morgan Keegan in Memphis, Tennessee, feels the chances of the
United States actually going over the fiscal cliff are remote,
he said "those who play in the market appear to be hedging their
bets by purchasing safe-haven securities like Treasuries."
    Giddis also said "the reduction of debt in Greece keeps
getting pushed out, and there doesn't seem to be a lot of
agreement as to how, when, what and where, when it comes to the
euro-zone fixes."
    The Federal Reserve was a large buyer of Treasuries on
Tuesday as part of its "Operation Twist" stimulus program, under
which it is selling shorter-dated Treasuries and using the
proceeds to buy longer-dated Treasuries in a bid to lower
longer-term borrowing costs like those on mortgages.
    The Fed on Tuesday bought $4.851 billion of Treasuries
maturing November 2018 through August 2020.
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