LONDON Nov 13 U.S. Treasury debt prices rose on
Tuesday on investor concern about a delay in payment of an aid
tranche to debt-stricken Greece and a potential U.S. fiscal
Treasuries extended last week's gains, which followed
President Barack Obama's re-election, as investors fret about
political brinkmanship by Democrats and Republicans over $600
billion in spending cuts and tax hikes due to come into effect
next year and which could send the economy into recession.
U.S. lawmakers have seven weeks to hammer out a compromise
to avoid the so-called "fiscal cliff".
Greece is also at the forefront of investors' minds again. A
euro zone finance ministers' meeting on Monday gave Athens two
more years to make cuts demanded of it but held off disbursing
more aid as the euro zone and IMF clashed over a longer-term
target date to shrink the country's debt pile.
"Greece is not going to be solved any time soon. The bigger
problem as usual in Europe is you have so many competing voices.
But as long as you have this uncertainty Treasuries are going to
do OK," a trader said.
"Bigger picture, the (Treasury) market is probably at risk
of some positive developments, if there's some easing of the
political deadlock in the U.S. but again I don't expect anything
to be resolved any time soon. As long as the fiscal cliff
remains an issue that's negative for business and equities and
positive for bonds."
Yields on 10-year Treasuries fell to 1.586
percent on Tuesday from 1.613 percent in late U.S. trade on
Friday. Yields on 30-year T-bonds eased to 2.72
percent from 2.751 percent.
There was no U.S. trading of Treasuries on Monday due to the
Veterans' Day holiday.
President Obama on Friday invited congressional leaders to
the White House to start negotiating a deal, vowing to veto any
bill that would extend tax cuts for the top 2 percent of wage
"Until the signs become clearer that current hopes of the
fiscal cliff being resolved can crystallise into a hard
agreement, the progress to a markedly higher yield environment
will continue to be delayed," Lloyds strategists said in a note.
They pointed to the muted response in Treasuries last week
to better-than-expected data including Friday's consumer
confidence numbers as fiscal crisis worries held sway and
predicted Treasuries would remain in demand, squeezing yields
lower, for as long as the uncertainty continues.
"Such a backdrop is not expected to dissipate anytime soon
and, given the medium-term outlook, which encompasses an
expected real money interest to reset/add to an underlying short
bias, the clear pain trade would be a further squeeze to yet
lower yield levels," Lloyds said.