LONDON Feb 25 U.S. Treasuries held steady in
Europe on Monday as concerns over potentially growth-crimping
spending cuts supported demand for low risk debt, while the
prospect of $99 billion in debt supply this week curbed gains.
About $85 billion in spending cuts will begin on March 1
unless U.S. politicians agree on how to avert the so-called
Economists say these cuts would hurt the U.S. economy. Ahead
of the deadline, the White House issued more dire warnings about
the harm they would do to Americans, giving a breakdown of the
loss of jobs and services in each state.
U.S. T-note yields were last at 1.965 percent,
the same as in late U.S. trade on Friday, well within the
1.76-2.06 range that has prevailed for much of this year.
The benchmark yield could test the low end of that band if
Democrats and Republicans fail to reach a deal before Friday,
some traders said.
"If it (the sequester) does happen you are going to get a
rally here in the market. There are some guys who are expecting
the yield to go down to 1.75 (percent) but I think that could be
challenging," a trader said.
The market will also be looking for reassurance in Federal
Reserve Chairman Ben Bernanke's bi-annual testimony this week
that the central bank will continue buying assets to support the
economy and is not leaning towards curbing its easing programme
later this year.
Bernanke will testify before the Senate Banking Committee on
Tuesday and the Housing Financial Services Committee on
In supply this week, the Treasury Department will kick off
with a $35 billion sale of two-year notes on
Monday. It will be followed by a $35 billion auction of
five-year debt on Tuesday and a $29 billion sale
of seven-year notes on Wednesday.
"While Fed Chairman Bernanke's semi-annual testimony on
Capitol Hill is likely to reiterate the prevailing accommodative
policy stance, we would use any supply-related back up in yields
within the current range to adopt a bullish stance from a
tactical perspective," Lloyds strategists said in a note.