December 3, 2012 / 11:46 AM / 5 years ago

TREASURIES-U.S. bonds steady, budget talks in focus

LONDON, Dec 3 (Reuters) - U.S. Treasuries prices held steady
on Monday, with demand for liquid assets underpinned by worries
about wrangling over a potential fiscal tightening in early 2013
that could tip the U.S. economy back into recession.

    * Treasury Secretary Timothy Geithner said on Sunday that he
"can't promise" the United States won't go over the so-called
fiscal cliff of $600 billion worth of tax increases and reduced
outlays scheduled to automatically take effect next year.
    He insisted it was up to congressional Republicans to avert
    * Treasuries prices slipped briefly in Asian trade after
data showing Chinese manufacturing activity quickened for the
first time in 13 months in November but the losses were quickly
reversed as the focus turned back to the U.S. budget talks.
    * "Some people are thinking that the risk of the fiscal
cliff has moved up considerably. There's been a lot of
conversation over that and that's keeping the market supported,"
a trader said. 
    * Yields on 10-year T-notes were last at 1.616
percent, the same as in late U.S. trade on Friday. Benchmark
yields dipped by seven basis points in November, their largest
monthly fall since July, as concern lawmakers would not be able
to reach a deal to avert the fiscal cliff bolstered bonds. 
    * "We would expect yields to remain around the 1.60 level as
this debate continues," another trader said.
    * Yields on 30-year Treasuries were up slightly
at 2.812 percent from 2.810 percent on Friday. 
    * The budget standoff is exacerbating a fragile economic
backdrop where growth is still anaemic and unemployment remains
historically high, analysts say.
    * On Friday, spending dropped for the first time in five
months in October, while a private report showed business
activity in the upper Midwest region barely grew in November.
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