TREASURIES-U.S. bond prices fall after move to help Greece

9. February. 2010
Reuters

The price of U.S. government debt fell on Tuesday as news that euro zone countries have agreed to help debt-stricken Greece curbed a bid for safety and ahead of fresh supply of Treasuries.

A German official said on Tuesday that euro zone countries were examining ways to help Greece, but had agreed to in principle to offer aid. For more, click on [ID:nBAT005104]

"You can see it's making investors and traders slightly more comfortable with risks," said Jeffrey Friedman, senior market strategist with Lind-Waldock in Chicago.

Investors have focused in recent days on the deepening fiscal crisis in Greece, whose government is struggling to rein in costs and maintain confidence in the soundness of its bonds. Greece's troubles sparked growing anxiety over recent days about the fiscal soundness of other members of the 16-nation euro zone, particularly Spain and Portugal, and drove investors to flee risky assets for the safety of U.S. Treasuries.

But news that other euro zone countries were planning to come to Greece's aid weakened the bid for Treasuries.

"The flight-to-quality trade is coming out of the market just a little bit," said John Brady, senior vice president for interest-rate products at MF Global in Chicago.

Treasury prices also sank ahead of a $40 billion auction of three-year notes, scheduled for 1 p.m. (1800 GMT).

"There's a lot of supply today, tomorrow and Thursday," said Raymond Remy, the head of fixed income at Daiwa Securities in New York. With no economic data scheduled to be released on Tuesday and stocks in positive territory, "my main focus is supply," he added.

The three-year Treasury note US3YT=RR was down 5/32 to yield 1.31 percent, up from 1.26 percent late on Monday, while the benchmark 10-year Treasury note US10YT=RR was down 13/32 to yield 3.62, up from 3.57 percent on Monday.

The government plans to auction a total of $81 billion of debt this week, with 10-year note and 30-year bond auctions set for Wednesday and Thursday.

Despite the back-up in Treasuries, traders were expecting the three-year auction to be strongly bid. The rest of the market, however, could see a lackluster day, as winter weather moves east.

The 30-year Treasury bond price US30YT=RR was off 19/32 for a yield of 4.54 percent, up from Monday's yield of 4.50.