By Ellen Freilich
NEW YORK Nov 9 U.S. Treasuries slipped on
Friday as stock gains sparked by improved consumer sentiment
whetted investors' appetite for riskier assets at the expense of
safe-haven U.S. debt.
U.S. consumer sentiment rose to its highest level in more
than five years in November as Americans felt more optimistic
about employment prospects and the outlook for the economy,
according to a Thomson Reuters/University of Michigan index.
Stocks rose slightly on that news.
Traders also noted that current bond market yields are about
where they were when a rally stalled in late August and early
"It might be difficult to escape this range," said ING
trader Jake Lowery, Treasury trader at ING Investment Management
in Atlanta, with $170 billion in assets under management.
Benchmark 10-year Treasury notes were down 2/32,
leaving their yields at 1.63 percent.
"Bond managers are a little overweight interest-rate risk so
a further rally in bonds probably would need to be fueled by
asset allocations out of equities," Lowery said.
In sync with the limited gains in stocks and amid concerns
about the euro zone economy and potential U.S. fiscal
tightening, selling of Treasuries was only tepid.
Markets are focused on what would happen to the economy if
and when U.S. federal spending cuts roll in and the Bush-era tax
cuts roll off next year, as would occur if no agreement is
reached to avert the so-called "fiscal cliff" designed to force
a reduction in the U.S. federal budget deficit.
The non-partisan Congressional Budget office has said such
an abrupt fiscal tightening could put the economy back into
recession and boost the unemployment rate to 9 percent.
Such a scenario would be supportive for bond prices.
President Barack Obama is due to make a statement on the
fiscal cliff from the East Room of the White House at 1:05 p.m.
EST (1805 GMT). The stance he is expected to take was
telegraphed by a top adviser on Thursday who claimed a mandate
from Tuesday's election victory to raise taxes on the wealthy.
In a news conference, the leader of the
Republican-controlled House of Representatives, Speaker John
Boehner, said raising tax rates on the wealthy would slow U.S.
job creation, but he also spoke about eliminating loopholes in
the U.S. tax code.
"The risk of political brinksmanship and rhetoric around the
fiscal cliff is likely to create more uncertainty even if we get
more cooperation in the end," ING's Lowery said.
That uncertainty could be supportive for bonds.
Concerns about the euro zone economy also constrained
selling of U.S. debt.
Growth in Germany, Europe's largest economy, is likely to
slow in the fourth quarter and the first three months of 2013.
Industrial production in France, the euro
zone's second-largest economy, shrank in October and the
country's central bank said it expected to slip into recession
at the end of 2012.
Meanwhile, Greece's government must vote on Sunday on its
2013 budget to get access to international aid after Wednesday's
tight vote favoring an austerity package totaling 13.5 billion
euros. And whether Spain would apply for financial aid was also
uncertain. Spain has so far resisted asking for aid.