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TREASURIES-Prices drop as hopes rise for Cyprus bailout
March 22, 2013 / 3:30 PM / 5 years ago

TREASURIES-Prices drop as hopes rise for Cyprus bailout

* Bond prices fall on hope for Cyprus deal
    * Ten-year yields hold in tight range of 1.90 to 1.97
    * Fed buys $3.68 bln in notes due 2018-2020

    By Karen Brettell
    NEW YORK, March 22 (Reuters) - U.S. Treasuries prices fell
on Friday as investors grew more optimistic Cyprus would reach a
deal to avert a meltdown of its banking system.
    The European Union gave Cyprus until Monday to raise the
billions of euros it needs to secure an international bailout or
face a collapse of its financial system that could push it out
of the euro currency zone. 
    "The details from the EU putting the deadline for Monday is
helping by giving a timeframe where a decision needs to be made.
I think equity markets and risk assets are responding positively
to that," said Sean Simko, portfolio manager at SEI Investments
in Oaks, Pennsylvania.
    Russia rebuffed Cypriot entreaties for aid on Friday,
leaving leaders scrambling for an alternative deal.
    Ten-year notes were last down 3/32 in price to
yield 1.93 percent, up from 1.92 percent late on Thursday. 
    The notes have traded at yields of between 1.90 and 1.97
percent this week after falling from around 2.06 percent last
    Fears that Cyprus' problems could be replicated in other
euro zone countries including Spain and Italy have pushed
Treasuries yields down this week, despite improving U.S.
economic data that had led some market participants to position
for yield increases.
    Traders are now questioning whether further volatility in
the euro zone will push benchmark Treasuries again below the
1.90 percent level, or if a resolution to Cyprus' problems will
bring attention back to the U.S. economy and send yields back
above 2 percent.
    "Overall, guys aren't really quite sure which way the market
is going to break," said Sean Murphy, a Treasuries trader at
Societe Generale in New York. 
    "There is a good pull for higher rates, and there is a
stubborn crowd saying it's the same old story and we're in a
low-rate environment for a while. It's choppy enough that you're
not getting enough on the data front to really convince you to
break out one way or another," he said. 
    Investors are scrutinizing data for signs of an improving
employment picture, which is seen as key for the Fed to end its
ongoing bond purchase program.
    The Fed bought $3.68 billion in debt due 2018 and 2020 on
Friday as part of this effort.
    Most economists expect the Fed to end or taper purchases at
the end of the year.

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