* Investors watch U.S. budget, aid to Greece, Middle East
* Next week's $99 bln in supply adds selling pressure
* Trading light after U.S. holiday, market to close early
By Richard Leong
NEW YORK, Nov 23 U.S. government debt prices
fell on Friday in light post-Thanksgiving trading and a
reduction in safe haven demand for bonds as Wall Street stocks
rallied on hopes lenders would soon release more cash to
The ceasefire between Israelis and Palestinians in Gaza also
soothed some investors, who had feared the conflict spreading
across the Middle East and disrupting oil supply.
"Some of the safe haven trades are coming out of the bond
market," said Larry Milstein, head of U.S. government and agency
trading at R.W. Pressprich & Co. in New York.
Despite Friday's selling, Treasury yields were squarely in
the middle of their recent ranges in advance of the $99 billion
coupon-bearing supply next week.
The U.S. Treasury Department will sell $35 billion of
two-year notes on Tuesday, $35 billion of
five-year notes on Wednesday and $29 billion of
seven-year notes on Thursday.
"Traders were cleaning up their positions going into next
week. Securities will price in a volatile manner going into the
end of year," said Stephen Wood, chief market strategist at
Russell Investments in New York. "In the short-term, Treasuries
will hover near these low rates."
On the open market, benchmark 10-year Treasury notes
traded 4/32 lower in price to yield 1.693 percent,
up 1.3 basis points from Wednesday's close. The 10-year yield
posted its first weekly rise in five weeks.
Friday's trading volume was one of the lowest so far this
year. Nearly $110 billion in Treasuries changed hands on
Tradeweb, which was 42 percent below its 30-day average.
The three major U.S. stock market indexes rose more than one
percent with the Standard & Poor's 500 rising 3.6 percent
on the week, its second best week so far in 2012.
Some investors remained wary about Greece and its lenders
reaching a compromise for the debt-laden country to obtain
another round of financial aid. They were also skeptical whether
U.S. leaders will clinch a budget deal before year-end.
Steering clear of a fiscal crisis in the United States and
stopping Greece going bankrupt are seen as vital to stabilizing
financial markets. Investors in general have favored bonds and
cash over stocks and other risky assets in the final quarter of
2012 until they believe these issues are resolved.
Earlier Friday, Greek finance Minister Yannis Stournaras
said the International Monetary Fund had relaxed its
debt-cutting target for Greece and only a 10 billion euro ($13
billion) gap remains to be filled for a vital aid installment to
In the United States, some traders bet on at least a
short-term solution from U.S. President Barack Obama and
lawmakers to avoid a series of automatic tax hikes and spending
cuts worth $600 billion set for January. While the measures may
cut the federal deficit, economists fear they could tip the
world's biggest economy into recession.
The White House and Congress are set to resume negotiations
over contentious issues about higher taxes on the wealthy and
possible reduction in social programs next week.
The U.S. bond market closed early at 2 p.m. EST (1900 GMT)
after it was shut on Thursday for the Thanksgiving holiday. Wall
Street ended trading at 1 p.m. (1800 GMT).