LONDON Nov 29 U.S. Treasuries fell on Thursday
as demand for low-risk assets dipped after positive signs that
lawmakers would reach a deal to avoid a fiscal cliff of tax
hikes and spending cuts early next year.
* Treasury futures retreated from recent highs to
stand 4/32 lower at 133-55/64, as selling continued into the
European session after comments on Wednesday from U.S. President
Barack Obama and House of Representatives Speaker John Boehner.
* Both signalled optimism that politicians will find a way
to avert $600 billion of tax increases and spending cuts
scheduled to take effect automatically next year and that could
drag the U.S. economy back into a recession.
* "(These comments) have reignited hopes that a fiscal deal
will be agreed by the end of the year. Consequently risk markets
have benefited from that and we've seen an unwind of the flight
to quality we had yesterday in core government bonds," said Nick
Stamenkovic, strategist at RIA Capital Markets in Edinburgh.
* Traders also attributed the dip to developments in the
euro zone where diminishing worries about Greece's immediate
debt problems spurred greater risk-taking, dampening the appeal
of high quality, low-yielding government bonds.
* "There's been buying in the euro zone peripherals so I
think we're seeing some selling versus Treasuries and German
Bunds as well ... that's driving an unwind in core government
bonds," a trader said.
* Supply of seven-year bonds later in the day was expected
to require only a minimal concession, following the trend set by
solid sales of two- and five-year bonds earlier this week.