LONDON, Jan 16 U.S. Treasury prices rose on
Wednesday, extending the previous day's gains on growing concern
about a looming political fight in Washington to lift the
federal government's debt limit.
* Federal Reserve bond repurchases this week are also
supporting demand for Treasuries, with yields retreating from
near nine-month highs hit in early January.
* Benchmark U.S. 10-year T-notes were last 4/32
in price to yield 1.82 percent, 1.4 basis points down from late
U.S. trade and within sight of a two-week low near 1.81 percent
set on Tuesday.
* "We saw real money buying out of Asia, more at the long
end of the curve now that supply is out of the way ... Plus the
buybacks are continuing to happen in that part of the curve
too," a trader said.
* Perceptions that negotiations on the U.S. borrowing limit
could continue right up to a self-imposed deadline of early
March, could add momentum to the rally in Treasuries - the
world's most liquid debt market - despite the risk of a federal
* The U.S. Treasury cautioned on Monday that the United
States was on track to exhaust options to meet its debt
obligations between mid-February and early March.
* "We continue to believe that the hurdles up ahead,
predominantly in the U.S. around the whole debt ceiling/fiscal
cliff II debate, will continue to generate underlying demand for
'core' fixed income into shorter-term retracement episodes,"
Lloyds strategists said in a note.
"Unless a miraculous agreement comes to fruition in the
meantime, we anticipate the debt ceiling/fiscal cliff
double-header will go to the wire again," they said.