NEW YORK: US Treasury debt prices dipped on Tuesday, with some easing of concern over political upheaval in France and the Netherlands while investors waited for US debt sales and the results of the Federal Reserve's two-day policy meeting.
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. However, investors will be watching for any suggestion of an eventual third round of quantitative easing.
Treasuries prices rose on Monday after a failure by the Dutch government to agree on budget cuts spiraled into a political crisis with the resignation of the prime minister, which cast doubt over the country's support of future euro zone measures.
Some in the market also feared a change at the helm of France could mean less support for austerity measures. Socialist candidate Francois Hollande beat incumbent Nicolas Sarkozy in first-round French presidential voting, raising market jitters that a change in leadership following the May 6 second-round vote may lead to less fiscal discipline.
However, the Dutch state on Tuesday successfully sold 2-year and 25-year bonds one day after the government's collapse hurt appetite for its debt in the secondary market.
"Treasuries have taken a small breather overnight and into the early New York session as some global risk appetite returns to the market," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
Benchmark 10-year Treasury notes were trading 5/32 lower in price to yield 1.96 percent, up from 1.94 percent late Monday, while 30-year bonds were 10/32 lower to yield 3.11 percent from 3.09 percent.
"Net-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 Treasury is set to sell $35 billion of two-year notes on Tuesday, then $35 billion of five-year notes on Wednesday and $29 billion of seven-year notes on Thursday.
While the Treasury will sell debt, the Fed was buying $4.25 billion to $5 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 US 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 home prices have gained since April 2011. That gain was itself an anomaly in a string of declines stretching back to May 2010.
US consumer confidence fell slightly in April, according to the Conference Board, an industry group. The group said its index of consumer attitudes edged down 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 US 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 prior months were higher than initially thought.
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