TREASURIES-U.S. budget worries lift bond prices

Thu Nov 29, 2012 12:54pm EST

Related Topics

* US House Speaker Boehner's remarks reduce budget deal
hopes
    * U.S. set to sell $29 billion in new 7-year notes


    By Richard Leong
    NEW YORK, Nov 29 (Reuters) - U.S. government debt prices
rose on Thursday on safe-haven demand from investors who were
nervous about the lack of progress in budget talks in Washington
and before a $29 billion auction of seven-year notes.
    A mildly disappointing report on U.S. economic growth,
together with the Federal Reserve's steady bond purchases, 
underpinned support for bond prices and lifted benchmark debt
prices for a fourth straight session.
    The Treasuries market remained choppy, responding to the
swings in stock prices reacting to remarks from Democratic and
Republicans leaders on their talks to prevent a budget crisis.
    A series of tax hikes and spending cuts will phase in next
year if a budget compromise is not reached, increasing concern
that the world's biggest economy will tip back into recession.
    "There is very little conviction with all the political
headlines," said Carl Lantz, chief U.S. interest rate strategist
at Credit Suisse in New York.
    Republican U.S. House of Representatives Speaker John
Boehner said there was no substantive progress made in the
budget negotiations. This was a perceived change in tone from
his remarks less than 24 hours earlier when he said he was
"optimistic" about a deal being reached. 
    Democratic Senate leader Harry Reid said later his party was
still waiting for a reasonable proposal from Republicans.
 
    Reduced optimism about a budget compromise soon on tax hikes
and spending cuts reduced earlier gains on Wall Street stocks
and bumped up bids for Treasuries.
    Benchmark 10-year Treasury notes were 2/32
higher in price at 100, yielding 1.625 percent, down 0.9 basis
point from late on Wednesday.
    The 30-year bond erased earlier losses and was
4/32 higher at 99-2/32. The 30-year yield was 2.796 percent,
down 0.7 basis point from late on Wednesday.
    In the "when-issued" sector, traders expected the seven-year
supply to sell at a yield of 1.052 percent, which
was more than 20 basis points below the yield cleared at the
seven-year auction in October.
    On Wall Street, the three major stock indexes retreated from
their initial highs.
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