LONDON Nov 15 U.S. Treasuries slipped on
Thursday as some investors pocketed profits after a sharp rally
over the past week, but fears of a fiscal crisis was likely to
keep underlying demand firm.
* The yield on 10-year notes stood at 1.61 percent
in European trade, up 2 basis points from late U.S.
levels and above a 10-week low of 1.572 percent hit on Tuesday.
* If the White House and a divided Congress do not produce a
deal on the federal budget before year-end, the series of
automatic tax hikes and spending cuts known as the fiscal cliff
will come into effect early in 2013, hitting economic growth.
* President Barack Obama said on Wednesday that Republicans
would have to agree to raise taxes on the wealthy as the first
step in a budget deal. But top Republican lawmakers have been
steadfast in pushing to hold down tax rates for top earners.
* Few market players expect a compromise between the
Democrats and the Republicans any time soon, suggesting firm
support for Treasuries in coming weeks.
* "Tens are a bit weaker but the market has risen quite
sharply recently so there's a bit of profit-taking," one trader
said. "President Obama's comments suggest there's little
likelihood for a compromise any time soon so the market will be
supported until fiscal cliff risks are out of the way."
* A significant rise in Treasury yields was also limited
after San Francisco Fed President John Williams' said late on
Wednesday the Federal Reserve would likely keep buying both
mortgage-backed securities and Treasuries until late 2013.
* "The Japanese are still underlying buyers. Williams
implying that QE3 is showing signs of working and maybe expanded
next year is pretty supportive for the market as well," another
* Minutes of the Federal Reserve policy meeting in October,
in which a number of officials reckoned the central bank would
need to ramp up its bond buying to help the economy, also gave
* The minutes showed a number of Fed officials thought the
central bank would need to buy more bonds when its "Operation
Twist" programme expires at the end of the year.
* That cemented market expectations that the Fed will keep
buying the same amount of bonds - about $85 billion each month -