February 4, 2013 / 3:05 PM / 5 years ago

TREASURIES-Bond prices rebound as bargain-hunting emerges

* Spain, Italy political news revive bids for bonds
    * Bond yields hit 9-month highs in overnight sell-off
    * Fed to buy $2.75 bln to $3.50 bln debt due 2020-2022
    * U.S. Dec factory orders data on tap

    By Richard Leong
    NEW YORK, Feb 4 (Reuters) - U.S. Treasuries prices rose on
Monday as bargain-minded investors emerged and pushed benchmark
yields back below 2 percent after they climbed overnight to
their highest levels in over nine months.
    Through Friday, Treasuries prices suffered their second
weekly decline on an improved outlook on the U.S. economy and
less anxiety about the festering fiscal problem in Europe.
    "We hit some important support levels and we are now coming
back a bit," said Thomas Roth, executive director of U.S.
government bond trading at Mitsubishi UFJ Securities USA in New
    Cautious investor optimism, which stoked Wall Street stocks
to five-year highs last week, was challenged over the weekend.
    Worries about possible political shake-ups in Europe and
their effect on the region's fiscal problems resurfaced,
although initially they did not cause a knee-jerk safe-haven
buying of low-risk government debt.
    They did cause steady weakness in Italian, Spanish and other
government debt in peripheral euro zone nations. This eventually
revived safe-haven buying of German Bunds, spilling over to the
Treasuries market, analysts said. 
    "The market stabilized on these news from Europe," said
Thomas Roth, executive director of U.S. government bond trading
at Mitsubishi UFJ Securities USA in New York.
   Spain's opposition party on Sunday called for the resignation
of Prime Minister Mariano Rajoy over a corruption scandal, as
Rajoy sought to pull euro zone's fourth biggest economy out of
five years of financial woes. 
    In Italy, the increased popularity of former prime minister
Silvio Berlusconi and his chances of regaining power also raised
worries about Italy's struggle to fix its fiscal problems.
    Benchmark 10-year Treasury notes were 10/32
higher in price at 96-24/32 with a yield of 1.991 percent, down
3.6 basis points from late on Friday.
    The 10-year yield earlier climbed to 2.059 percent, which
was its highest level since last April 12 when it touched an
intraday peak of 2.065 percent, according to Reuters data.
    Other factors that could propel bond prices higher this week
included the absence of new longer-dated government debt supply
and the ongoing bond purchases from the Federal Reserve aimed to
support the economic recovery, traders and analysts said.
    The U.S. central bank will buy $2.75 billion to $3.50
billion in Treasuries that mature between Feb. 2020 and Nov.
2022 at 11 a.m. (1600 GMT), which is part of its $44 billion
purchase of Treasuries in February.

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