TREASURIES-Prices gain on safety bid as Cyprus in focus

Thu Mar 21, 2013 11:17am EDT

Related Topics

* Prices rise on safety bid spurred by Cyprus
    * 10-year notes hold in range between 1.90 and 1.97 percent
    * Fed buys $1.46 billion in bonds due 2036-2043

    By Karen Brettell
    NEW YORK, March 21 (Reuters) - U.S. Treasuries prices gained
on Thursday as investors focused on whether Cyprus would be able
to reach a deal that would enable it to avoid default and the
likely collapse of its banking system.
    Treasuries have been boosted this week by a safe-haven bid
spurred by Cyprus's troubles as investors worry that bank stress
could extend to other countries, including Italy and Spain, and
that Cyprus could leave the euro zone.
    The ECB gave Cyprus until Monday to raise billions of euros
to clinch an international bailout or face losing emergency
funds for its banks and the likelihood of collapse.
 
    "There's a little bit of wait and see on Cyprus," said Lou
Brien, market strategist at DRW Trading in Chicago. "If they
can't come up with anything and the odds of Cyprus leaving the
euro zone rise, then I think that will create a flight to safety
in Treasuries."
    Benchmark 10-year notes were last up 8/32 in
price to yield 1.93 percent. The notes' yields have traded in a
range between around 1.90 percent and 1.97 percent this week,
after falling from around 2.06 percent last week.
    The debt may gain further to around the 1.90 percent yield
area as investors worry about developments over the weekend.
    "While there are some discussions going on there doesn't
seem to be any solid progress being made. I don't think people
want to be vulnerable to a 'risk off' move over the weekend,"
said Rick Klingman, a Treasuries trader at BNP Paribas in New
York.
    Thirty-year bonds rose 23/32 in price to yield
3.16 percent, down from 3.20 percent late on Wednesday.
    The Federal Reserve's latest meeting, which ended on
Wednesday, did little to distract the focus from Europe.
    Fed Chairman Ben Bernanke said he had not yet seen
meaningful changes to the troubled labor market hence the Fed's
aggressive policy stimulus stance, though the central bank's
policy-setting committee acknowledged brighter economic signs.
 
    The Fed bought $1.46 billion in bonds due 2036 and 2043 on
Thursday as part of its ongoing bond purchase program.
    A resolution in Cyprus may set up Treasuries for renewed
yield increases as the economy improves and investors debate
when the Fed will end its bond purchases.
    "People are not looking to hold these positions for the next
six months. If anything, they are looking at where they could
set up new shorts," said Gennadiy Goldberg, interest rate
strategist at TD Securities in New York.
   Meanwhile the Treasury said on Thursday it will sell $99
billion in new coupon-bearing debt next week, including $35
billion in two-year notes, $35 billion in five-year notes and
$29 billion in seven-year notes.
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