TREASURIES-Prices rise after recent slump; Fed minutes eyed

Tue Aug 20, 2013 9:04am EDT

Related Topics

* Investors looking to Fed minutes due Wednesday
    * Benchmark yields ease from two-year highs
    * Fed minutes could be key for gauging Fed QE exit

    By Luciana Lopez
    NEW YORK, Aug 20 (Reuters) - Prices for U.S. Treasuries rose
on Tuesday after a recent slump left yields at two-year highs,
with investors dumping riskier assets around the world to scoop
up relatively cheap U.S. government debt.
    Worries that the U.S. Federal Reserve could soon slow or
even stop its massive bond-buying program have sent yields
soaring in recent months - by more than 100 basis points since
May.
    "The market had backed up to levels where valuations got
particularly attractive," said Jake Lowery, a portfolio manager
for global interest rates at ING U.S. Investment Management in
Atlanta.
    In addition, developed markets around the world are also
showing signs of growth, including the United States, in
contrast to concerns emerging markets are slowing down.
    Because emerging markets are generally less liquid, the
combination of economic concerns and worries about a Fed
slowdown have made those assets less attractive recently.
    "The ongoing meltdown in regional currencies is starting to
negatively influence all risk assets and, for the moment, is
helping create a bid for the Treasury market," said John Briggs,
managing director and U.S. rate strategist at RBS in Stamford,
Connecticut.
    Those emerging currencies, as well as global stocks, all
suffered on Tuesday as investors fretted the flood of easy money
from the Fed could be coming to an end.
    The benchmark 10-year note gained 16/32 in price
to yield 2.825 percent, from 2.882 percent on Monday.
    The 30-year bond added 21/32 in price to yield
3.862 percent, compared to 3.901 percent on Monday.
    The question of when the Fed might hit the brakes on its $85
billion per month in buying of Treasuries and mortgage-backed
securities has dominated the market for U.S. government debt
recently.
    Fed speakers have emphasized that they will keep their key
interest rate low even as they slow their bond purchases. But
markets have nonetheless proved nervous since Fed Chairman Ben
Bernanke first started hinting at a policy exit in May.
    Investors are now awaiting minutes, due on Wednesday, of the
U.S. central bank's most recent meeting. Those minutes could
help investors better understand the mind-set of policymakers as
they consider weaning the world's biggest economy off the
so-called quantitative easing program.    
    Half the economists in a Reuters poll expect the Fed to
begin tapering its asset purchases in September. 
    There are few economic indicators slated for this week,
leaving investors instead focused on the Fed.
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