LONDON Feb 27 U.S. debt prices edged higher on
Wednesday supported by persistent concerns that Italy's
political stalemate may drag the euro zone back into crisis.
Treasury futures were 4/32 higher on the day at
132.51/64 as safe haven demand remained strong due to euro zone
concerns, despite a closely-watched Italian bond auction
producing a solid result.
Treasuries briefly dipped after the auction, but their rapid
recovery showed many still remain nervous that the euro zone's
third-largest economy will be unable to form a functioning
government after inconclusive elections.
"The deals went very well, that wasn't too much of a
surprise ... but the Italian political situation hasn't gone
away because they've had a successful auction," a trader said,
explaining the rebound in T-note prices.
Comments from Federal Reserve Chairman Ben Bernanke on
Tuesday which helped calm speculation that the Fed may be
leaning towards ending its bond buying stimulus plans also
helped to put a floor under Treasury prices.
Technical charts signalled prices were more likely to rise
than fall, with UBS analyst Richard Adcock highlighting a break
of resistance at 131-63/64, the 38 percent retracement of the
December to February selloff.
"The trade now opens the door for further strength over the
coming days, with the next main resistance marked by the
December 28th high at 133-5/64," Adcock said, highlighting that
the barrier was likely to prove difficult to breach.