TREASURIES-U.S. yields dip as fiscal talks stall
LONDON Dec 20 (Reuters) - U.S. Treasuries rose on Thursday as investors favoured the safety of government bonds at the expense of equities and other risky assets after optimism over fiscal negotiations in the United States waned.
* The S&P 500 fell 0.8 percent on Wednesday after President Barack Obama threatened to veto a Republican proposal towards reaching a deal to avoid the "fiscal cliff" of tax hikes and spending cuts due to come into force early next year.
* Benchmark 10-year T-note yields fell to 1.77 percent, down about 4 basis points from late U.S. trade. The yield rose to 1.847 percent on Tuesday, its highest in about two months on rising expectations the White House and Congress were moving closer to reaching a deal on the budget but this has dissipated.
* "The fiscal cliff news didn't sound particularly constructive, things deteriorated so that's obviously given Treasuries a bid, but volumes are exceptionally low," a trader said.
* The top Republican in the Senate, Mitch McConnell, said he was still optimistic that a deal could be done by the end of the week.
* Treasury note futures rose 13/64 to 132-23/64 but technical levels suggested that recent gains in U.S. debt prices might not last long.
* "Two days ago we bounced off the 78.6 Fibonacci retracement, which was the November low as well. Since then, we've bounced a little bit, but I don't think that bounce is going to go very far," Axel Rudolph, technical strategist at Commerzbank, said.
"This is just a minor corrective bounce, it's not a trend change."