LONDON, Feb 27 (Reuters) - U.S. debt prices edged higher on Wednesday supported by persistent concerns that Italy’s political stalemate may drag the euro zone back into crisis.
Treasury futures were 4/32 higher on the day at 132.51/64 as safe haven demand remained strong due to euro zone concerns, despite a closely-watched Italian bond auction producing a solid result.
Treasuries briefly dipped after the auction, but their rapid recovery showed many still remain nervous that the euro zone’s third-largest economy will be unable to form a functioning government after inconclusive elections.
“The deals went very well, that wasn’t too much of a surprise ... but the Italian political situation hasn’t gone away because they’ve had a successful auction,” a trader said, explaining the rebound in T-note prices.
Comments from Federal Reserve Chairman Ben Bernanke on Tuesday which helped calm speculation that the Fed may be leaning towards ending its bond buying stimulus plans also helped to put a floor under Treasury prices.
Technical charts signalled prices were more likely to rise than fall, with UBS analyst Richard Adcock highlighting a break of resistance at 131-63/64, the 38 percent retracement of the December to February selloff.
“The trade now opens the door for further strength over the coming days, with the next main resistance marked by the December 28th high at 133-5/64,” Adcock said, highlighting that the barrier was likely to prove difficult to breach.