LONDON Dec 4 U.S. Treasury yields rose on
Tuesday as stock futures pointed to a higher opening on Wall
Street but the fall in bond prices should be limited by concerns
over U.S. budget talks, analysts said.
* Ten-year U.S. Treasury yields were up 1.4
basis points at 1.64 percent - in the middle of what one trader
called a "micro range" of 1.67-1.60 percent - w i th an eye on
higher equity markets . Thirty-year yields
also rose 1.6 bps to 2.81 percent.
* The "December lull has probably come even earlier this
year. It feels like we are in it already, in terms of volume,"
said the trader. "(I am) trying to buy dips, but they are so
shallow, it's almost impossible."
* As long as politicians cannot agree on how to avert
automatic U.S. spending cuts and tax hikes next month, analysts
expected the sell-off in Treasuries to be limited. Worries about
the "fiscal cliff" intensified on Monday after the White House
dismissed a budget deal proposal from Republicans, saying it did
not meet President Barack Obama's pledge to raise taxes on the
* "I don't see a major rise in Treasury yields before we
solve the fiscal cliff," Philip Marey, strategist at Rabobank
* As negotiations become more difficult, Treasury yields
could fall, h e said. "We could revisit previous lows like 1.40
(percent) for example in the most extreme case," he said,
referring to levels reached by 10-year yields in July. The
market is a traditional safe haven because it is so big and
* Economists fear failure to achieve a deal in time to avert
a fiscal crisis could tip the economy back into recession.
Against this backdrop, U.S. manufacturing unexpectedly
contracted in November to its lowest level in more than three
years - a slide that may have been aggravated by superstorm
Sandy, which devastated the U.S. east coast in late October.
* A bout of data this week will provide further insight into
the health of the world's largest economy culminating in the
blockbuster non-farm payrolls numbers on Friday. But market
moves may be subdued as the year end approaches, traders said.
* "I just don't have anything at all," a second trader said,
when asked how he was positioned in the U.S. Treasury market.
"You are at a point in time in the year where fund managers have
either made their year or they haven't, traders have either made
their year or they haven't."