November 26, 2012 / 12:35 PM / 5 years ago

TREASURIES-U.S. fiscal jitters, Spain underpin safety bid

LONDON, Nov 26 (Reuters) - U.S. Treasury prices rose on
Monday, recovering from losses last week, as fiscal challenges
in the United States and political uncertainty in Spain
underpinned appetite for safe-haven assets.
    * Ten-year U.S. Treasury yields fell 2.9 basis
points to 1.66 percent, having risen as far as 1.70 percent on
    * U.S. Treasury futures fell last week in
holiday-thinned trading after lawmakers in Washington sounded
confident that a deal could be reached to avert the "fiscal
cliff" of spending cuts and tax hikes - due to take effect in
early 2013. By Monday, that confidence seemed to have waned
    * "Markets are nervous (that) we might not get an agreement
before year end," said Nick Stamenkovic, bond strategist at RIA
Capital Markets. "The time for achieving a compromise is not
long. I think this issue will continue to move Treasuries around
in a choppy session at least near term."
    * Stamenkovic, however, added that Treasuries did not offer
great value over the medium term and expected yields to rise
over the next three to six months.
    * One trader said he continued to favour either being flat
or long - having buying positions - on U.S. Treasuries.
    * "I would be a buyer of Treasuries on a dip. That's what
works," said the trader.
    * The victory of separatists in regional elections in
Catalonia on Sunday was another source of uncertainty for
riskier assets, the trader said, although Spanish yields showed
limited reaction to the outcome.
    * "You couple that with Greece - we will get a conclusion on
Greece (but) it will be another fudge - I think that says bonds
are better bid."
    * Euro zone finance ministers and the International Monetary
Fund will seek to unfreeze the second bailout package for Greece
on Monday, but they first need to agree if some of the official
loans to Athens might eventually be forgiven to cut Greek debt.
    * Five-year U.S. Treasury yields fell 1.4 basis
points to 0.68 percent, while 30-year yields shed
2.8 bps to 2.80 percent.
    * Bond prices rose even though the market faces $99 billion
of supply this week. The U.S. Treasury Department will sell $35
billion of two-year notes on Tuesday, $35 billion
of five-year notes on Wednesday and $29 billion
of seven-year notes on Thursday.
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