* Prices rise on safety bid spurred by Cyprus
* 10-year notes hold in range between 1.90 and 1.97 percent
* Fed buys $1.46 billion in bonds due 2036-2043
NEW YORK, March 21 Prices for U.S. Treasuries
rose on Thursday as disarray in bailout plans for Cyprus stoked
fears the euro zone member could see its banking sector fail and
the country default.
Treasuries have mostly advanced this week after European
partners demanded that Cyprus tax bank accounts to help fund a
bailout. But Cypriot lawmakers rejected the idea, leaving Cyprus
scrambling to find another solution.
Standard & Poor's lowered Cyprus' sovereign credit rating to
CCC on Thursday, marking the country's debt as highly
The Cyprus worries have fueled fears about Spain and Italy,
much larger euro zone economies and therefore harder to rescue,
and the possibility of a similar bank tax in those nations.
The European Union gave Cyprus until Monday to raise
billions of euros to secure an international bailout or face a
collapse of its financial system that could push it out of the
"There's a little bit of wait and see on Cyprus," said Lou
Brien, market strategist at DRW Trading in Chicago. "If they
can't come up with anything and the odds of Cyprus leaving the
euro zone rise, then I think that will create a flight to safety
Benchmark 10-year notes were last up 10/32 in
price to yield 1.923 percent. The notes' yields have traded in a
range between around 1.90 percent and 1.97 percent this week,
after falling from around 2.06 percent last week.
The debt may gain further to around the 1.90 percent yield
area as investors worry about developments over the weekend.
"While there are some discussions going on there doesn't
seem to be any solid progress being made. I don't think people
want to be vulnerable to a 'risk off' move over the weekend,"
said Rick Klingman, a Treasuries trader at BNP Paribas in New
Thirty-year bonds rose 1-2/32 in price to yield
3.143 percent, down from 3.20 percent late on Wednesday.
"Without liquidity support from someone, banks will never be
able to reopen," said Carl Weinberg, chief economist of High
Frequency Economics. "We should also note that the government
has no access to capital markets and probably little or no cash
to pay its bills or to make payroll."
The Federal Reserve's latest meeting, which ended on
Wednesday, did little to distract the focus from Europe.
Fed Chairman Ben Bernanke said he had yet to see meaningful
changes to the troubled labor market, hence the Fed's aggressive
policy stimulus stance, though the U.S. central bank's
policy-setting committee acknowledged brighter economic signs.
The Fed bought $1.46 billion in bonds due 2036 and 2043 on
Thursday as part of its ongoing bond purchase program.
A resolution in Cyprus may set up Treasuries for renewed
yield increases as the economy improves and investors debate
when the Fed will end its bond purchases, currently $85 billion
"People are not looking to hold these positions for the next
six months. If anything, they are looking at where they could
set up new shorts," said Gennadiy Goldberg, interest rate
strategist at TD Securities in New York.
The Treasury said on Thursday it will sell $99 billion in
new coupon-bearing debt next week, comprising $35 billion in
two-year notes, $35 billion in five-year notes and $29 billion
in seven-year notes.