GLOBAL MARKETS-Treasury rates rise, U.S. stocks fall as Washington talks stall

Tue Oct 15, 2013 3:52pm EDT

* U.S. debt, budget talks suspended
    * Dollar pares gain, U.S. stocks edge lower
    * U.S. Treasuries prices slip
    * Europe data shows signs of strength


    By Caroline Valetkevitch
    NEW YORK, Oct 15 (Reuters) - U.S. short-term bill rates rose
and stocks slid on Wall Street as U.S. Senate fiscal
negotiations were suspended, making prospects for an agreement
to end the U.S. government's budget and debt impasse less
promising.
     The uncertainty surrounding the U.S. debt ceiling has led
to a substantial selloff in short-term U.S. Treasury bills. The
Treasury's weekly auctions of three- and six-month bills drew
below average demand as investors become increasingly concerned
about the chances of a delayed or missed coupon payment. The
value of bids received for the sales over those accepted was the
lowest since 2009. For analysis on debt sales, see
 
     The U.S. political standoff initially showed signs of
giving way to a Senate deal to reopen federal agencies and
prevent a damaging default on federal debt. The deadline to lift
the U.S. debt ceiling is Oct. 17. Factbox on default risks
 
    Senate Majority Leader Harry Reid, a Democrat, and his
Republican counterpart, Mitch McConnell, ended talks on Monday
with Reid saying they had made "tremendous  progress."
 
    But U.S. Senate negotiations to lift the debt limit and
repopen the U.S. government, which has been in a partial
shutdown since Oct. 1, were suspended Tuesday afternoon until
House Speaker John Boehner works out a fiscal plan that can
proceed in the U.S. House, according to Sen. Richard Durbin.
     "The odds that there won't be a deal over the next month
are near zero, but there is some chance we won't see something
by the 17th. If that happens ... we could easily correct 3-5
percent," said Jim McDonald, who helps oversee $803 billion as
chief investment strategist at Chicago-based Northern Trust
Global Investments.
    The Dow Jones industrial average was down 111.64
points, or 0.73 percent, at 15,189.62. The Standard & Poor's 500
Index was down 10.59 points, or 0.62 percent, at
1,699.55. The Nasdaq Composite Index was down 19.39
points, or 0.51 percent, at 3,795.89. 
    MSCI's world equity index, which tracks
shares in 45 countries, was down 0.1 percent, giving up earlier
gains. In Europe, the FTSEurofirst 300 ended up 0.9
percent.      
    In the U.S. Treasury bill market, trading was choppy, with
rates on Treasury bills maturing soon after Oct. 17 the most
sensitive to the back and forth in Washington.
    Earlier, Treasury rates on T-bill issues due in October to
November had fallen to their lowest level in a week, although
they remained elevated compared with three weeks ago.
    Even though the securities sold would not mature for another
three- and six months, the Treasury's weekly auctions of three-
and six-month bills on Tuesday drew demand that was "way below
the average over the past few months" with the value of bids
received over those accepted the lowest since 2009, said Stone &
McCarthy Research Associates analyst Cathy Guo.
    The one-month Treasury bills due on Nov. 7 are the
most sensitive to efforts to raise the statutory $16.7 trillion
borrowing limit. The benchmark 10-year U.S. Treasury note
 was down 12/32, the yield at 2.7258 percent. 
 
           
    DOLLAR HIGHER
    The dollar pared earlier gains, which came on optimism over
possible progress in Washington.
    The dollar index was last up 0.3 percent at 80.512
after touching its highest since Sept. 18.
    The euro was down 0.3 percent on the day after
touching a two-week low of $1.3478.
    In Europe, an unexpected rise in German analyst and investor
sentiment lifted the outlook for the region's largest economy.
    The influential ZEW Institute's monthly poll of economic
sentiment rose to its highest level since April 2010 and beat a
Reuters poll forecast for no change. 
    A separate report on price pressures in Britain showed
inflation was higher than expected in September and house prices
had risen sharply, adding to doubts over how long the central
bank can hold down interest rates.
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