TREASURIES-Prices steady to higher ahead of Bernanke testimony

Fri Feb 22, 2013 11:45am EST

Related Topics

* Bernanke testimony to be parsed for asset-purchase clues
    * ECB loan payback news offsets rise in German sentiment
    * Benchmark U.S. yields remain locked in tight 13-bps range

    By Chris Reese
    NEW YORK, Feb 22 (Reuters) - U.S. Treasuries were trading
steady to slightly higher in price on Friday, in the absence of
key U.S. economic data, as investors looked ahead to testimony
next week from Federal Reserve Chairman Ben Bernanke.
    Treasuries began the day trading lower in price, with
traders citing a small increase in selling pressure after the
release of the German Ifo sentiment survey, which beat forecasts
and offset some pessimism about euro zone growth prospects
triggered by downbeat data earlier in the week. 
    Losses were tempered by news that banks in Europe will repay
less than half the expected amount of crisis loans they took
from the European Central Bank a year ago, which suggested much
of the euro zone financial system was still dependent on cheap
ECB funds. 
    Treasury debt prices were also supported by worries over the
economic impact of automatic U.S. government spending cuts set
to begin March 1. Few analysts expect Democrats and Republicans
to reach agreement on averting the cuts ahead of the deadline.
    Investors were also reluctant to part with lower-risk assets
like Treasuries heading into the Italian national elections on
Sunday and Monday as the country struggles in a deep recession.
 
    In the absence of U.S. economic data on Friday, investors
were looking ahead to testimony from Fed Chairman Bernanke on
Tuesday for signs of whether or when the central bank will wind
down its economy-boosting stimulus program of asset purchases.
Under the plan, it is currently buying $85 billion per month of
Treasuries and mortgage-backed securities.
    The latest minutes from the Federal Open Market Committee,
released this week, showed policymakers had discussed slowing or
stopping Fed bond purchases aimed at reducing unemployment.
    "The next big event for the marketplace will be Bernanke's
testimony next Tuesday at 10:00 a.m. EST (1500 GMT). We look for
that testimony to be a bit dovish in nature, reinforcing his
view that quantitative easing will continue for the foreseeable
future," said Tom di Galoma, managing director at Navigate
Advisors LLC in Stamford, Connecticut.
    As part of its stimulus program, the Fed on Friday bought
$1.45 billion of Treasuries maturing February 2037 through
August 2042.   
    While speculation over whether the Fed will wind up its
purchase program this year has bounced Treasuries around this
week, benchmark yields remain locked in a 13 basis point range
of 1.93 percent to 2.06 percent that has held for nearly a
month.
    On Friday, 10-year notes were trading 3/32
higher in price to yield 1.96 percent, down slightly from 1.97
percent late Thursday.
    "This begins the 19th session in a row where tens have
traded within 5.5 basis points of 2 percent, which maybe
shouldn't be all too surprising given the rate-repressed
environment, even after Fed Minutes and deluge of data from the
past couple of days," wrote RBS' Gabriel Mann, William O'Donnell
and John Briggs.
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