LONDON Dec 10 U.S. bond yields fell on Monday
on concerns over protracted budget negotiations in Washington,
political rumblings in Italy and expectations for further
monetary policy easing by the Federal Reserve.
* President Barack Obama and Republican Speaker of the House
of Representatives John Boehner failed to reach an agreement on
Sunday on ways to stop large-scale, automatic fiscal tightening
from kicking in next year.
* Economists fear the "fiscal cliff" of $600 billion worth
of tax hikes and spending cuts could send the U.S. economy back
into recession and drag the rest of the world with it. Lawmakers
only have a few weeks left to try to avert it.
* In Italy, Prime Minister Mario Monti said on Saturday he
would resign once the budget for 2013 was approved. Monti was
trusted by investors to bring down Italy's huge debt and is
credited for stabilising the country's bond markets.
* The announcement came after former Prime Minister Silvio
Berlusconi's party withdrew support for Monti last week and he
said he could run to become a premier for a fifth time.
* This raised fears Monti's successor may not continue his
economic reforms and Italy may come to the forefront of the euro
zone debt crisis again.
* The uncertainty boded well for assets perceived as
safe-havens. U.S. 10-year T-note yields fell 2.4
basis points to 1.5993 percent. T-note futures rose 7/32
* We haven't seen much progress on the fiscal cliff over the
weekend ... and the Monti/Berlusconi story is playing a role as
well," Rabobank strategist Philip Marey said.
* A better-than-expected November jobs report on Friday
did little to alter expectations that the U.S.
Federal Reserve is likely to muster some additional bond buying
plans at its two-day meeting which will end on Wednesday.
* "Most people anticipate it (more stimulus). The logic is
very simple ... I don't think the Fed wants to add a monetary
cliff to the fiscal cliff," Marey said.
(Reporting by Marius Zaharia/ editing by Chris Pizzey, London
MPG Desk, +44 (0)207 542-4441)