March 25, 2013 / 11:11 AM / 5 years ago

TREASURIES-Cyprus bailout deal cools demand for U.S. bonds

LONDON, March 25 (Reuters) - U.S. debt prices fell on Monday after Cyprus agreed a last-gasp deal to prevent the collapse of its banking sector, cooling demand for the safety of low-yielding Treasuries.

Cyprus reached a deal with international lenders to secure a 10 billion euro bailout hours before a deadline, prompting some selling from investors who had bought Treasuries last week for their safety and liquidity when talks were struggling.

“The general theme today is risk-on so the market is selling off here more than anything else,” a trader said.

“We’re seeing dribs and drabs of buying going through as guys look to close out their short positions but otherwise the bias is for lower (prices).”

Treasury futures fell 21/64 to 131-06/32 and cash market 10-year yields sat in the middle of the 2013 trading range at 1.96 percent -- up 4 basis points on the day.

Without major economic data due on Monday the rest of the session was likely to be influenced by technical chart levels with yields rising towards the two-percent barrier although this levels was expected to remain unbroken.

UBS said momentum indicators showed a slight bias towards a rise in Treasury futures, and falls were likely to be contained by support levels close to current prices.

“The first support focus for any correction is marked by the 38 percent retracement of the latest recovery at 131-01/32, which is under test again so far this morning,” said Richard Adcock, technical analyst at UBS in a note to clients. (Reporting by William James/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)

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