LONDON Feb 22 U.S. Treasuries dipped on Friday
after German data beat forecasts and Europe was likely to
dominate sentiment for much of the day with investors awaiting
figures on banks' early repayments of ECB loans.
Treasury futures fell 4/32 to 131-43/64, giving back
some of the gains made earlier this week, although 10-year
yields remained below the closely watched 2
Traders cited a small increase in selling pressure after the
release of the German Ifo sentiment survey, which beat forecasts
and tempered some of the gloom of downbeat data elsewhere in the
euro zone earlier this week.
Treasuries were seen struggling to regain losses throughout
the remainder of the session, with many viewing current prices
as high, even with the prospect of enforced U.S. government
spending cuts beginning to bite next week.
"A lot of people are looking at the March 1 cuts deadline
but I'm not necessarily sure that's going to help the market
rally significantly from here - we're below 2 percent right now
and these are lofty levels for Treasuries," a trader said.
UBS Technical charts also showed resistance to further price
rises with Treasury futures struggling to break the 38 percent
retracement of the December to February selloff which stands at
"This must be broken to trigger a more extended recovery,"
said UBS's Richard Adcock, who recommended selling the contract
at 131-24/32 with a view to buying back at 130-20/32.
Shorter-dated U.S. bonds could suffer later in the session
if data shows banks opted to repay a large amount of emergency
loans from the European Central Bank ahead of schedule. That
would spur expectations of higher money market rates in the euro
zone, which would have a wide-reaching impact.
"If we do get a big number, the selloff in the front end of
the curve will spill over into the U.S. ... The market is
expecting between 125 and 150 billion (euros). If it's
significantly larger than that, I'd expect pressure on the
curve," the trader said.