TREASURIES-U.S. bond prices slip in somnolent trading

Mon Dec 24, 2012 9:39am EST

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* Traders refrain from making bets on U.S. fiscal worries
    * Trading volume plummets before Christmas
    * U.S. bond market closes early, to be shut on Tuesday

    By Richard Leong
    NEW YORK, Dec 24 (Reuters) - U.S. government debt prices
slipped on Monday as most traders moved to the sidelines before
Christmas and given the absence of a U.S. budget deal that
averts a package of automatic tax hikes and spending cuts going
into effect next year.
    Analysts downplayed the day's price moves as signals of
shifts in market sentiment.
    There was little impetus for investors to change their bond
positions without fresh U.S. economic data or the Federal
Reserve buying or selling Treasuries for its bond programs aimed
to help the economy, analysts said.
    The U.S. bond market will close early at 2 p.m. (1900 GMT),
an hour after Wall Street. U.S. and most European markets will
be shut on Tuesday, while major Asian markets will be open.
    "The markets are dead. Those traders who are working are
making sure positions don't get out of hand due to thin
trading," said Lou Brien, market strategist at DRW Trading in
Chicago.
    Overnight Treasuries trading volume was a little more than
10 percent of its average, according to bond broker ICAP.
    The budget negotiations in Washington have stopped as U.S.
President Barack Obama and Congress are on a holiday break.
There are seven more days in which they could reach a deal that
will steer away from the 'fiscal cliff," a $600 billion worth of
tax increases and spending reduction that could phase in next
year.
    Economists have warned this fiscal move could cause a U.S.
recession and hurt the global economy. 
    With the deadline only a week away, traders have not
completely abandoned hopes of a deal, even one that simply
postpones broad changes in federal taxes and spending.
    "They will probably come up with something unsatisfactory,"
Brien said.
    Benchmark 10-year notes were last 2/32 lower in
price to yield 1.779 percent, up 0.9 basis point from late on
Friday. 
    Thirty-year bonds fell 7/32 with a yield of
2.946 percent, up 1.2 basis point from Friday's close.
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