NEW YORK, Feb 11 (Reuters) - Treasury debt prices slipped early on Monday as U.S. stock futures signaled a higher open, curbing for the moment the safe haven bid that has been the backbone of the past seven months’ bond market rally.
But two-year note yields were not far above the lowest levels since 2004 as nagging worries about the global financial system threatened to renew pressure on equities and stoke demand for top-rated government securities.
With no U.S. data releases scheduled Monday, bond investors looked ahead to the release Wednesday of U.S. January retail sales as a gauge of slipping consumer spending and to Federal Reserve Chairman Ben Bernanke’s testimony to Congress on Thursday about the state of the economy.
“When Bernanke testifies, that is what everybody is waiting for,” said Doug Roberts, chief investment strategist with Channel Capital Research in Shrewsbury, New Jersey. Bond investors hope to get Bernanke’s latest views on the possibility of recession in the United States and on inflation pressures, Roberts said.
The benchmark 10-year note's price, which moves inversely to its yield, slipped 5/32 for a yield of 3.67 percent US10YT=RR, compared with 3.65 percent late on Friday.
Analysts expect the Fed to continue cutting interest rates to try to avert economic contraction.
Fed funds futures are fully discounting a further half percentage point of easing at the Fed’s next policy meeting on March 18. That would bring the Fed funds rate down to 2.5 percent from 3.0 percent now. The funds rate was at 5.25 percent as recently as September.
The two-year note, which responds closely to expectations for central bank interest rate moves, traded down 2/32 in price for a yield of 1.99 percent US2YT=RR, compared with 1.95 percent late on Friday.
Additional reporting by Jamie McGeever in London Reporting by John Parry; Editing by Theodore d’Afflisio
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