NEW YORK, June 26 (Reuters) - U.S. Treasuries were flat on Tuesday, but were likely to retain their safe-haven appeal amid concerns about two troubled hedge funds and expectations of weaker consumer confidence and housing reports.
Government bonds have tapped flight-to-quality flows as problems at two Bear Stearns’ hedge renewed worries about the spillover effect from the housing sector’s woes, causing credit spreads to widen and stock markets to fall.
The funds made bad bets on collateralized debt obligations linked to subprime mortgages and worries over the magnitude of local banks’ exposure to troubles in the subprime sector has unnerved investors.
“The flight-to-safety will continue at least until the Fed meeting. There is a tremendous amount of uncertainty right now,” said Doug Roberts Chief Investment Strategist, Channel Capital Research in Shrewsbury, New Jersey.
“People are kind of looking for any place where they can go. Treasury yields are now somewhat attractive in terms of what they are offering. You are going to see a continuation of that trend until the Fed meeting.”
The benchmark 10-year Treasury notes US10YT=RR were flat in price to yield 5.09 percent, versus 5.09 percent late on Monday.
New home sales in May are expected to have slipped to an annual rate of 925,000 units following an unexpected jump in April to 981,000. The report is due at 10:00 a.m. (1400 GMT).
Data also due at 10:00 a.m. is expected to show a dip in consumer confidence in June.
While the the Federal Reserve is not expected to cut interest rates when it concludes its two-day meeting on Thursday, analysts say prospects of monetary policy easing could be boosted if the problems in the subprime mortgage sector deepened.
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