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TREASURIES-Bonds firm on view Fed exit from stimulus may take time
June 14, 2013 / 3:21 AM / in 4 years

TREASURIES-Bonds firm on view Fed exit from stimulus may take time

TOKYO, June 14 (Reuters) - U.S. Treasuries were firm in Asia on Friday as traders took the view that any end to the Fed’s bond buying programme will be gradual and that no rates hikes were imminent.

* A report in The Wall Street Journal that an adjustment in the Fed’s bond-buying program did not mean that the U.S. central bank would end “all at once” or that the Fed was “anywhere near raising short-term interest rates” helped support sentiment.

* The article triggered short-covering in interest rates futures, such as the eurodollar three-month rate futures and Fed funds rate futures .

* The 2014 September eurodollar contract rose to 99.50, its highest level in 2 1/2 weeks, and up from Tuesday’s 10-month low of 99.365, a level that is fully pricing in a 25 basis point rate hike.

* The 10-year U.S. notes yield stood at 2.154 percent , off a 14-month high of 2.293 percent hit on Tuesday, having fallen 8 basis points on Thursday.

* Investors expect the Federal Reserve to assure markets that any scaling back of its bond buying does not mean that a rate hike is around the corner at its policy meeting next week.

* Fears of the Fed’s tapering have hit asset markets in the past few weeks, sending emerging market benchmarks to lows not seen in months.

* “The WSJ article gave the market a bit of relief. But there’s no denying that the Fed is likely to scale back its bond buying so I don’t expect the 10-year yield to fall below two percent,” said a trader at a Japanese bank.

* That relief offset the negative impact from data showing a drop in new jobless claims in the latest week, evidence of strength in the economy that would argue for less Fed accommodation rather than more.

* Retail sales were more robust than expected, rising 0.6 percent in May, above economists’ forecast of 0.4 percent, after 0.1 percent gain in April.

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