By Luciana Lopez and Ellen Freilich
NEW YORK Nov 9 U.S. Treasuries saw choppy
trading on Friday, with the long end of the curve advancing even
as other maturities slipped, as investors remained wary of the
approaching "fiscal cliff" despite words of compromise by
President Barack Obama.
In his first formal address since his re-election on
Tuesday, Obama invited congressional leaders to the White House
to start negotiating a deal to avert the package of automatic
tax hikes and spending cuts set to kick in at the start of the
Obama's invitation came just hours after John Boehner, the
Republican Speaker of the House, said raising tax rates on the
wealthy would slow U.S. job creation. But he also talked about
eliminating loopholes in the U.S. tax code.
"The market is trying to understand what the backdrop is
going to look like in the weeks and months and quarters ahead,"
said Tom Porcelli, chief U.S. economist at RBC Capital Markets
in New York.
"Both sides have made it sound as if they're willing to work
with one another. But again, the devil's in the details."
U.S. stocks also cut gains after Obama's remarks.
Thirty-year bonds rose 10/32 to yield 2.762
percent, from 2.777 percent on Thursday. Those bonds are on
track for the biggest weekly fall in yield since the final week
U.S. 10-year notes pared early losses after
Obama spoke, briefly trading flat before more recently trading
down 01/32 to yield 1.620 percent, from 1.618 percent on
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.
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 be the case 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.
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
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.
Data early in the session showed 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.
That helped curb appetite for safe-haven U.S. debt earlier
in the day, although the data's effects faded as worries about
the fiscal cliff came to the fore.