TREASURIES-Prices dip with some optimism "cliff" can be avoided

Mon Dec 31, 2012 12:08pm EST

Related Topics

* "Fiscal cliff" deadline only hours away
    * Some investors betting government can still reach a
"cliff" deal
    * Yields well within a range that has held since early
August

    By Chris Reese
    NEW YORK, Dec 31 (Reuters) - U.S. Treasury debt prices eased
on Monday on some investor optimism that Washington officials
might complete a last-minute deal to avert the "fiscal cliff" of
tax increases and government spending cuts that could push the
U.S. back into recession. 
    Treasuries prices rose last week as worries over the impact
of the "fiscal cliff" spurred safe-haven buying of U.S.
government debt, but a few investors on Monday were betting the
government could still come up with a plan to at least
temporarily stave off some tax increases and spending cuts.
    The U.S. Congress comes back on Monday with only a few hours
of actual legislative time scheduled in which to act if an
agreement materializes.    
    "Talk of a last minute deal has driven the long-end more
than half a point lower," said Richard Gilhooly, interest rates
strategist at TD Securities in New York.
    Benchmark 10-year Treasury notes were trading
10/32 lower in price with their yield rising to 1.74 percent
from 1.70 percent late Friday. Benchmark yields have gained 13
basis points since the beginning of December, and are on track
for the biggest monthly rise since March.
    Benchmark yields are set to close out the year down 14 basis
points from the end of 2011, but remain very near the middle of
a range of 1.54 percent to 1.89 percent that has held since
early August.
    U.S. Senator Jon Kyl on Monday said a "lot of progress" has
been made in talks to avert the "fiscal cliff" but he cautioned
that it is unclear if the progress will spur legislation the
Senate can vote on before the deadline at midnight EST (0500
GMT).
    However, U.S. Senate Majority Leader Harry Reid said on
Monday that congressional negotiators still need to bridge
differences in the last-ditch talks. 
    "Treasuries remain in a holding pattern as the market awaits
the results of the budget debates," said David Ader, head of
government bond strategy at CRT Capital Group in Stamford,
Connecticut.
    Thirty-year bonds, which earlier briefly dropped
a full point, were trading 29/32 lower in price to yield 2.91
percent, up from 2.87 percent late Friday.
    The Treasury market will close early at 2 p.m. EST (1900
GMT) on Monday ahead of the New Year's Day holiday on Tuesday.
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