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TREASURIES-Bond prices rise on bargain-hunting, weaker stocks
February 4, 2013 / 4:41 PM / 5 years ago

TREASURIES-Bond prices rise on bargain-hunting, weaker stocks

* Spain, Italy political news revives bids for bonds
    * Bond yields hit nine-month highs in overnight sell-off
    * Fed purchases $3.23 billion Treasuries due 2020-2022
    * U.S. Dec factory orders rise 2.2 percent, less than

    By Richard Leong
    NEW YORK, Feb 4 (Reuters) - U.S. Treasuries prices rose on
Monday as bargain-minded investors emerged and pushed benchmark
yields back below 2 percent after they climbed overnight to
their highest in over nine months.
    A pullback in Wall Street stocks from five-year highs
also rekindled safe-haven appetite for low-risk government debt.
    Last week's sell-off in Treasuries was "overdone," said
Sharon Stark, chief fixed-income strategist at D.A. Davidson in
St. Petersburg, Florida. "Two-percent (yield) is a good buying
opportunity for most investors."
    Through Friday, Treasuries prices suffered their second
weekly decline on an improved outlook for the U.S. economy and
less anxiety about the festering fiscal problems in Europe.
    Cautious investor optimism, which pushed the Dow Jones
industrial average above 14,000 for the first time since
October 2007 on Friday, was challenged over the weekend.
    Worries about possible political shake-ups in Europe and
their effect on the region's fiscal problems resurfaced,
although initially they did not cause knee-jerk safe-haven
buying of low-risk government debt.
    They did cause steady weakness in Italian, Spanish and other
government debt in peripheral euro zone nations. This eventually
revived safe-haven buying of German Bunds, spilling over to the
Treasuries market, analysts said. 
    "The market stabilized on these news from Europe," said
Thomas Roth, executive director of U.S. government bond trading
at Mitsubishi UFJ Securities USA in New York.
    Spain's opposition party on Sunday called for the
resignation of Prime Minister Mariano Rajoy over a corruption
scandal, as Rajoy sought to pull the euro zone's fourth-biggest
economy out of five years of financial woes. 
    In Italy, the increased popularity of former prime minister
Silvio Berlusconi and his chances of regaining power also raised
worries about Italy's struggle to fix its fiscal problems.
    Benchmark 10-year U.S. Treasury notes were 16/32
higher in price at 96-31/32 with a yield of 1.966 percent, down
5.9 basis points from late on Friday.
    The 10-year yield earlier climbed to 2.059 percent, its
highest since last April 12 when it touched an intraday peak of
2.065 percent, according to Reuters data.
    The 30-year bond was up 1-2/32 in price,
yielding 3.169 percent, down 5.9 basis points from Friday's
close and down 8.5 basis points from its session high.
    The yield on 10-year Italian government notes 
rose 15 basis points near 4.50 percent, the highest since late
December, while the yield on 10-year Spanish sovereign debt
 jumped a quarter point to 5.44 percent. 
    On Wall Street, the Dow was down 0.8 percent to a little
below 14,000, while the Standard & Poor's 500 index was
nearly 0.9 percent lower, hovering just above 1,500. 
    Other factors that could propel bond prices higher this week
included the absence of new longer-dated government debt supply
and regular bond purchases by the Federal Reserve aimed at
supporting the economic recovery, traders and analysts said.
    The U.S. central bank will buy $3.23 billion in Treasuries
that mature between February 2020 and November 2022, part of its
$44 billion purchase of Treasuries in February.
    On the data front, a weaker-than-expected 1.8 percent
increase in U.S. factory orders undercut hopes of a pickup in
the economic recovery in the wake of Friday's payrolls report
and survey on manufacturing activity.
    Moreover, some analysts cautioned the lack of a deal in
Washington to avert deep spending cuts set to kick in next month
could be a drag on the U.S. economy. These cuts, which would
total $112 billion in 2013, will likely hold bond yields at
their current levels, they said.

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