* Bond market recovers on weaker stocks, dollar
* Speculation over Fed's bond purchases limits rebound
* U.S. Fed to buy up $1.75 billion in long-dated Treasuries
By Richard Leong
NEW YORK, May 20 U.S. government debt prices
rose on Monday, rebounding from last week's selloff as Wall
Street stocks retreated from record highs and the dollar
weakened against the yen, offering few alternatives to bonds.
Speculation about whether the U.S. Federal Reserve will
begin slowing its bond purchases later this year capped the
rebound, however, as analysts have become more comfortable with
the view that the economy is on a firmer footing and job growth
is on a sustainable path.
"The combination of lower equities and a stabler yen has
allowed some retracement of the bond prices' fall on Friday,"
said Mike Cullinane, head of Treasuries trading in D.A. Davidson
in St. Petersburg, Florida.
Benchmark 10-year Treasuries notes last traded
up 6/32 in price at 1.933 percent, down 2.1 basis points from
late Friday. The 10-year yield was as high as 1.972 percent
earlier, just 1 basis point below the two-month peak set last
week due to stronger stock prices and a surging dollar.
The greenback retreated against the yen and other major
currencies after Japan's economy minister Akira Amari remarked
its currency might have weakened enough in the wake of a bold
$1.4 trillion monetary plan announced in April.
The yen fell to 4-1/2-year low against the dollar last week.
Wall Street stocks opened lower with the Standard & Poor's
500 down 0.1 percent from its all-time high.
Traders and analysts anticipated the Treasuries market will
likely move in a tight range until Wednesday, as it awaited
clues on where the U.S. central bank stands on quantitative
easing from Fed Chairman Ben Bernanke who will testify about the
economy before a Congressional panel on Wednesday.
While the Fed's aggressive purchases of Treasuries and
mortgage-backed securities, currently at $85 billion a month,
known as QE3, have helped the housing market and consumers and
companies to pay down their debt, they have fallen short of
achieving the goals of substantially lowering unemployment and
sustaining real economic growth, analysts said.
Since late last year, there have been discussions among Fed
policy-makers over the cost of sticking to this ultra-easy
monetary scheme, which critics said is inflationary.
While the Fed's QE3 have boosted stocks and helped the rich,
it is unclear whether they are doing enough for the broader U.S.
economy, Dallas Fed President Richard Fisher told CNBC
television on Monday. Fisher has been an opponent of the Fed's
asset purchase program.
"There is some impending fear that the Fed will taper its
bond purchases," said Robbert Van Batenburg, director of market
strategy at Newedge USA LLC in New York.
Many analysts on Wall Street, however, reckoned the Fed will
unlikely back away from its commitment to bond purchases this
year with unemployment still high and recent data suggesting
higher risk of deflation.
At 11 a.m. (1500 GMT), the U.S. central bank will buy $1.25
billion to $1.75 billion in Treasuries that come due in Feb.
2036 to May 2043 for its QE3 program.