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* Lack of progress on U.S. budget talks lifts bonds * U.S. to sell $35 billion new 5-year notes * Fed to buy up to $7.50 bln in bonds in two operations * U.S. new home sales data, Fed's Beige Book on tap By Richard Leong NEW YORK, Nov 28 (Reuters) - The absence of progress in Washington in talks to avert a fiscal crisis lifted U.S. government bond prices for a third straight day on Wednesday in advance of a $35 billon auction of five-year federal debt. Worries abound that gridlock between the White House and Congress over the series of automatic tax increases and spending cuts worth $600 billion, that could phase in next year, could well push the U.S. over what has been dubbed the "fiscal cliff." This outcome could send the economy into a recession and have underpinned safe-haven support for the bond market since the U.S. presidential election three weeks ago. Investor dialed back hopes for a timely budget deal after Senate Majority Leader Harry Reid, a Democrat from Nevada said on Tuesday he was disappointed that there has been "little progress" in the negotiations. "Since his (Reid's) comments, the stock market has gone down and bonds have been popping up," said Thomas Roth, executive director in U.S. government bond trading at Mitsubishi UFJ Securities USA in New York. U.S. President Barack Obama will meet will business executives from larger companies later Wednesday in a public push for his tax plan, while leading Republican lawmakers seem pat on their stand to extend tax cuts for all Americans including the top earners. Concerns over the possibility of the "fiscal cliff" kept longer-dated Treasury yields below their 100-day moving averages. Benchmark 10-year Treasury notes last traded 8/32 higher in price with a yield of 1.610 percent, down 3 basis points from late on Tuesday and under its 100-day moving average of 1.6495 percent, according to Reuters data. The 30-year bond was 22/32 higher in price, yielding 2.753 percent, down 3 basis points from Tuesday's close and below its 100-day moving average of 2.7875 percent. U.S. stocks opened lower on Wednesday putting the S&P 500 on track for a third consecutive decline, as investors remained on edge given the lack of details on U.S. budget talks. In the futures and options market, traders were selling volatility on the view that interest rates and bond yields will hold in tight range until a budget compromise is reached. Given the market's preoccupation with the U.S. budget talks, economic data have taken a backseat as a factor on its perception about interest rates and Federal Reserve policies. The government will release data on new home sales in October at 10 a.m. (1500 GMT), followed by the Fed's Beige Book at 2 p.m. (1900 GMT), an anecdotal view from the Federal Reserve Districts on U.S. economic conditions. Between the two reports, the Treasury Department will continue its month-end sales of new short-to-medium debt, totaling $99 billion. It will auction $35 billion in five-year notes at 1 p.m. (1800 GMT), following record demand for $35 billion of two-year notes on Tuesday. It will sell $29 billion of seven-year debt on Thursday. In the "when-issued" sector, traders anticipated the upcoming five-year supply to sell at a yield of 0.648 percent , which was lower than the yield of 0.774 percent on the five-year notes sold in October. Meanwhile, the Fed will conduct two separate purchases of Treasuries as a part of its "Operation Twist," a program aimed to lower long-term interest rates to help the economy. The first operation at 11 a.m. (1600 GMT) involved Treasuries that mature in Feb 2036 to Nov 2042, while the second at 2 p.m. (1900 GMT) involves government bonds that mature in Nov 2018 to Nov 2020.