LONDON Feb 11 U.S. bond prices slipped in
European trading on Monday as dealers looked to make room for
$72 billion of Treasuries due to hit the market later this week.
The soft start mirrored early weakness in German bonds and
was exaggerated by a lack of Asian participation, where markets
were closed for a public holiday.
Treasury futures slipped 5/32 to 131-37/64 while
10-year T-note yields rose 2 basis points to 1.97 percent - both
remain within ranges that have held for the past two weeks.
Traders said that with no major economic data due, the fall
in prices was being driven by the weight of upcoming supply
which begins with a $32 billion sale of three-year debt on
Tuesday, followed by 10- and 30-year sales later in the week.
"With Asia out there's been little in the way of flow this
morning but what we are seeing is a bit of setting up for the
supply on the back of the refunding," a trader said.
With little maturing U.S. debt this week to be reinvested
the supply was weighing on prices, but the sales were still
expected to attract solid bidding thanks to key budget issues,
which remain unresolved.
Investors wary that spending cuts due to take effect on
March 1 would hurt the economy - stoking demand for the safety
of U.S. Treasuries - would be closely watching President Barack
Obama's State of the Union speech on Tuesday.
"What people will really be looking for is not his grand
policy plans, but the immediate issue of sequestration ... the
market will be looking more anxiously towards Capitol Hill and
the White House," said Marc Ostwald, strategist at Monument
Securities in London.
Obama has urged Congress to take steps to postpone harsh
government spending cuts due to come into effect on March 1.
Financial markets would take any postponement of the
spending cuts as a positive, even if not a long-term solution,
dampening Treasuries. However, a failure to head off the risk of
growth-stifling cutbacks would push jittery investors towards
Treasuries, Ostwald said.