LONDON Dec 6 U.S. benchmark Treasury yields
held near three-week lows on Thursday with no sign of an
imminent breakthrough in budget talks to avert a sharp fiscal
tightening that could undermine the economic recovery.
* Although many investors expect political leaders in
Washington to eventually reach a deal to avert a fiscal
contraction early next year as spending cuts kick in and tax
cuts expire, there was no sign of progress in talks on
* The 10-year T-notes last yielded 1.586 percent
, 0.5 basis points below late U.S. levels and near
Wednesday's low of 1.576 percent, which was its lowest level in
nearly three weeks.
* "The risk is we continue to push down below the 1.50
percent level. The Treasury market is well bid and guys will be
looking to stay long with this talk of a fiscal cliff," a trader
* The White House and Republicans in Congress spent much of
the day talking up their positions, fuelling investor fears that
brinkmanship could delay a deal.
* "Most people think there will be a deal at some point.
Still I guess politicians cannot compromise easily, which means
there's risk they will go off the cliff," a trader at a Japanese
* The two-year yield stood slightly lower on the day at
0.238 percent, and could fall to its lowest level
since early October, as market players expect the Federal
Reserve to halt its selling of short-term notes when Operation
Twist expires this month.
* Economists expect the Fed to replace Operation Twist, in
which it buys long-dated bonds and sells the same amount of
shorter-dated ones, with a fresh bond-buying programme which
would also support demand for Treasuries.
* Investors were also looking to the monthly non-farm
payrolls report on Friday though traders said market reaction
might be limited by questions about its accuracy as it was
likely to be distorted by the effects of superstorm Sandy on the
U.S. East Coast.
* The report is expected to show employers added 93,000 jobs
in November, according to the media estimate of economists
polled by Reuters, compared with 171,000 in October.