| NEW YORK
NEW YORK Nov 8 Prices for U.S. Treasuries
jumped on Thursday after a strong sale of 30-year debt
underscored demand on the so-called fiscal cliff and continuing
worries in Europe.
In its final refunding auction of the week, the U.S.
Treasury sold $16 billion of 30-year bonds at a high yield of
"The bond auction came strongly through, with impressive
stats across the board," Nomura analysts wrote in a note to
At 2.77, the bid-to-cover ratio was the highest since
December, with indirect bidders at the highest since April 2011.
"The fact that this demand was led by indirects ... leads us
to believe that foreign accounts have finally started buying the
long end in preparation for the fiscal cliff and as a hedge for
continued euro zone worries," they wrote.
"Alternately this could reflect fast-money asset allocation
type flows, similar to late-2011," they added, grading the
U.S. 30-year bonds turned around losses to jump
1-4/32 after the debt sale to yield 2.774 percent, from 2.829
percent on Wednesday.
Prices for 10-year notes also pared losses to
gain modestly, up 2/32 to yield 1.637 percent, compared to 1.644
percent on Wednesday.
The Fed's late morning purchase of $4.893 billion in coupons
with maturities ranging from Nov. 15, 2020 to Aug. 15, 2022 was
also supportive for Treasuries prices.
The Federal Reserve is currently buying about 92 percent of
new issuance in the long end in its "Operation Twist" monetary
stimulus program, said Cantor Fitzgerald analyst Justin Lederer
in New York.
That program is due to end next month, but many market
participants believe the Fed will announce more Treasury
purchases at the December meeting of the Federal Open Market
Committee, the Fed's monetary policy-making arm.
"The 30-year, like every other sector of the curve, has been
stuck in an extremely tight range since mid-September," Lederer
noted, its yield moving between 2.77 and 3.02 percent.
"We do not expect this range to break significantly in the
near term," he said.
President Barack Obama's election victory on Tuesday
supported bonds amid expectations for modest economic growth and
accommodative, bond-friendly monetary policy.
But financial markets wonder if the White House and Congress
will be able to mitigate the potential damage of a $600 billion
package of automatic tax increases and spending cuts due to take
effect early in the new year.
"A Democratic president and Republican House will need to
come together to deal with the nation's fiscal health," said
Zach Pandl, strategist at Columbia Management in Minneapolis.
"Having the election over is a relief, but investors still
need to see a favorable resolution of the fiscal cliff before
taking a more optimistic view on the U.S. economy," he said.
Concern about the European debt crisis also supported
Treasuries. Greek lawmakers, by a very thin margin, approved an
austerity package constructed to get international aid, but the
coalition government still needs to pass the 2013 budget in a
vote expected on Sunday.
Spain showed investors will buy its long-term debt on
Thursday with a successful bond auction that completed its 2012
The European Central Bank kept rates on hold on Thursday and
its president, Mario Draghi, sounded downbeat on the euro zone
economy and said he was ready to start new purchases of bonds.