Justin Lederer Comments: Debt Prices Slip As Some Fears On Europe Ease
April 25, 2012, Reuters
U.S. Treasury debt prices dipped on Tuesday as a successful auction in the Netherlands of government bonds helped ease concerns about political upheaval in Europe, while investors looked ahead to further U.S. debt sales and the results of the Federal Reserve's two-day policy meeting.
The Netherlands ' successful auction of two-year and 25-year bonds alleviated fears of contagion from the European debt crisis a day after the Dutch government collapsed following a failure to agree on budget cuts.
"Treasuries have taken a small breather overnight and into the ... New York session as some global risk appetite returns to the market," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
The benchmark 10-year Treasury note declined 7/32 in price to yield 1.97 percent, up from 1.94 percent late Monday, while the 30-year bond fell 16/32 to yield 3.11 percent, up from 3.09 percent at Monday's close.
"Net (Frankfurt: A0Z22E - news ) -net, the Treasury market is still extremely well bid, with yields trading at the lower end of what had been the comfort ranges set in late 2011-early 2012," Lederer said.
The Fed, which is due to announce its rate decision on Wednesday, is likely to stick to its previous message that official borrowing costs should stay near zero until at least late 2014. Investors will be watching for any suggestion of an eventual third round of quantitative easing.
"The minutes from the last meeting revealed little appetite among Fed officials for a new round of asset purchases. The weaker-than-expected non-farm payroll figures in March shouldn't have dramatically changed that assessment," said Paul Ashworth, chief U.S. economist of Capital Economics in Toronto, adding, "The Fed's best option is to stay on the sidelines waiting to see which way the recovery breaks."
The Treasury sold $35 billion of two-year notes on Tuesday, and is set to auction $35 billion of five-year notes on Wednesday and $29 billion of seven-year notes on Thursday. Investors often try to push prices lower going into such auctions, in an effort to force price concessions.
While the Treasury sold debt, the Fed bought $4.758 billion of longer-dated Treasuries on Tuesday as part of its latest economic stimulus program, which has been nicknamed "Operation Twist."
Treasuries were little moved by data showing U.S. single-family home prices rose for the first time in 10 months in February. The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.2 percent in February on a seasonally adjusted basis, matching economists' forecasts.
It was the first time that home prices have gained since April 2011, a gain that itself broke a string of declines stretching back to May 2010.
U.S. consumer confidence fell slightly in April, according to the Conference Board, an industry group. The group said its index of consumer attitudes dipped to 69.2 from a downwardly revised 69.5 in March. Economists had expected a reading of 69.7, according to a Reuters poll.
The Commerce Department reported new U.S. single-family home sales dropped in March to their lowest level in four months, although the reading still beat analysts' expectations as the government said sales in previous months were higher than initially thought.
