TREASURIES-Prices slip on fiscal hopes, await Bernanke

Tue Nov 20, 2012 9:22am EST

Related Topics

* Prices slip on stronger data, fiscal hopes
    * Investors focused on Bernanke speech later on Tuesday
    * Volumes expected to decline before Thanksgiving holiday

    By Karen Brettell
    NEW YORK, Nov 20 (Reuters) - U.S. Treasury debt prices
slipped on Tuesday for a second day as housing data pointed to
an improving housing market and as investors took more faith
that lawmakers in Washington will reach a deal to avert a budget
crisis that could send the economy into recession.
    U.S. housing starts rose to their highest rate in more than
four years in October, suggesting that the housing market
recovery was gaining steam, even though permits for future
construction fell, the Commerce Department said on Tuesday.
 
    Bond investors are also gaining more confidence that
Congress will reach a deal to avert the so-called "fiscal cliff"
of spending cuts and tax hikes due to come into effect in early
2013.
    "It's a continuation of yesterday's trade. There is some
reasonable optimism out of Washington that the foundation for
some sort of budget is going to come into fruition here," said
James Newman, head of Treasuries and Agency trading at Keefe,
Bruyette and Woods in New York.
    "In general things feel a little bit better, which means
there is a little bit of selling in the bond market," he said.
    In the past two weeks Treasuries yields had fallen to
two-month lows as investors fled stocks on concerns that U.S.
lawmakers would fail to reach a deal.
    Benchmark 10-year Treasuries were last down 7/32
in price to yield 1.63 percent, up from 1.61 percent on Monday.
The yields have fallen from 1.75 percent on Nov. 6.
    Thirty-year bonds fell 13/32 price to yield 2.78
percent, up from 2.76 percent late on Monday.
    Investors are also focused on a speech by Federal Reserve
Chairman Ben Bernanke in New York, which is scheduled for 1215
EST (1715 GMT).
    Market participants will be looking for further signs about
whether the U.S. central bank will link policy actions to
so-called thresholds -- economic data points, like specific
unemployment and inflation rates -- that would signal when the
central bank is likely to begin raising interest rates from near
zero.
    Many of the Fed's officials want to adopt them and
influential Fed Vice Chair Janet Yellen voiced her strong
support last week, making the project sound all but inevitable.
    "I think Bernanke will try to build upon the platform she
delivered last week in terms of putting some more meat on the
bones in terms of the timeline of when the FOMC might move to
targeting a specified level of employment, rather than a vague
moving end date for when short rates will stay very low," said
Andrew Wilkinson, chief economic strategist at Miller Tabak & Co
in New York.
    Trading volumes are also expected to decline before the U.S.
Thanksgiving holiday on Thursday.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.