LONDON: US government bond prices edged higher on Friday as buyers crept back into the market after a steep fall earlier this week pushed yields up to levels that proved attractive to some.
US debt sold off in the first half of the week after economic data beat expectations and prompted some players to push back their estimate of when the US Federal Reserve will resume buying bonds to lower rates and stimulate the economy.
However, that move hit technical resistance when 10-year yields rose to 1.86 percent, just shy of the 200-day moving average. Since then investors with a negative medium-term outlook on the US economy and health of the euro zone have bought back in, driving yields down to 1.83 percent.
"I don't mind getting long this market. You may not be right for the rest of August but we're only a bad headline away from Europe going south again ... and that will be Treasury positive," a trader said.
Treasury futures rose 2/32 to 132-27/64, well above the 15-week low of 132-5/32 plumbed earlier this week.
Trading activity remained light with many market participants away from their desk over the summer holidays, but focus on bigger-picture issues should resume next week when the Federal Reserve releases minutes of its latest meeting.
The US central bank is seen likely to restart purchasing bonds to stimulate the country's economy but the minutes may shed some light when that move will come. With expectations high, any sign of a delay will be negative for Treasuries.
"Overall markets are expecting quantitative easing and probably in September one of the surprises would be if the FOMC minutes show the doves do not have the position that we think they have," said Rabobank strategist Philip Marey.
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