LONDON Oct 11 U.S. Treasuries held steady in
Europe on Thursday, underpinned by a downgrade of Spain's credit
rating, but gains were capped before a 30-year bond auction and
a slew of economic data.
* Standard & Poor's cut Spain's ratings to one notch above
"junk" status, bringing it in line with peer Moody's, which is
yet to conclude its own review this month, and piling on
pressure on Madrid to seek a bailout.
* Treasuries have rallied this week on growing investor
concerns over the health of the global economy and earnings
downgrades that pushed Wall Street shares to one-month lows on
Wednesday. That spurred solid demand at a 10-year U.S. treasury
* "The guys were focusing on the Moody's review so S&P took
the market a little bit by surprise. The (Treasury) market
rallied on that late yesterday and we're holding that bid today
with (German) Bunds catching up," a trader said.
* "But we have the 30-year auction and weekly jobless
numbers later today and PPI data tomorrow ... that could throw a
bit of volatility into the mix," he said.
* The yield on 10-year notes stood at 1.68 percent
, little changed from the previous U.S. close, but
near its lowest level since Friday after the strong 10-year
auction results triggered a wave of short covering.
* The Treasury will auction $13 billion worth of 30-year
bonds later in the day, the last leg of this week's $66 billion
* The 30-year T-bond was slightly lower in price to yield
2.89 percent, around late New York levels on
* "If today's 30-year bond auction turns out to be strong
just like yesterday's 10-year auction, the market is likely to
advance further," said Tomoaki Shishido, fixed income analyst at
* Some market players are also looking to the U.S. vice
presidential debate later in the day as President Barack Obama's
victory in next month's election, once almost taken for granted
in markets, is coming into question after his weak performance
in last week's debate between the presidential candidates.