Justin Lederer Comments: Yields Dip As Greek Ructions Fuel Safety Buying
May 9, 2012, Thomson Reuters
worries over the trajectory of Europe's debt crisis and supported safe-haven buying of U.S. government debt.
Mainstream conservatives in Greece failed to put together a coalition following weekend elections, leaving the country's Left Coalition party with a chance to form a government opposed to a European Union and International Monetary Fund financial bailout.
Worries that Greece would eventually become unable to pay ts debt fueled general concerns over contagion from the European debt crisis.
Treasuries benefited as a result, with benchmark 10-year Treasury notes trading 7/32 higher in price to yield 1.86 percent, down from 1.88 percent late Monday.
"The Treasury markets open the session firm with a global 'risk off' sentiment as concerns escalate around Greece and the formation of a government after Sunday's elections," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
The drop in yields comes ahead of the U.S. Treasury's auction of $32 billion of three-year notes on Tuesday afternoon. Lederer did not expect the higher prices to have a significant impact on demand in Tuesday's debt sale, which kicks off the Treasury's quarterly refunding.
"We do not believe a major concession setup is needed given it is the lowest duration of the refunding package and most notably the current global market conditions and preference for safe assets," he said.
The Treasury will also sell $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday in the refunding.
"We head into the three year auction with euro zone politics at the forefront once again, as the hung parliament in Greece creates an atmosphere of uncertainty," said George Goncalves, head of U.S. interest rates strategy at Nomura Securities International in New York.
Treasuries had gained on Monday as the outcome of weekend elections in Greece and France raised concerns about the progress of European austerity steps and fueled a rally ignited by disappointing U.S. employment data on Friday.
Thirty-year bonds were trading 19/32 higher in price to yield 3.04 percent, down from 3.06 percent late Monday.
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