US govt bonds dip as stocks rebound

NEW YORK: US Treasuries fell on Monday as stocks stabilized after weeks of losses, and traders prepared for a $99 billion slate of bond auctions this week.

The rare equities gains came as some investors wondered whether Federal Reserve Chairman Ben Bernanke would outline new measures to bolster the ailing economy.

Though many in the bond market are skeptical about the chances of a third quantitative easing program, they used the retreat in Treasuries to set up for the auctions.

Another bond-buying campaign by the Fed, like the one Bernanke signaled at last year's Jackson Hole gathering, could could actually push Treasuries prices lower if it shored up stock market sentiment.

"In light of last year's Jackson Hole revelation that QE-2 was then close at hand, we're sympathetic to the market focus on this year's comments by Bernanke," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.

"But we ultimately expect that while the chairman may deliver a more apprehensive assessment of the state of the US economy, he won't provide any new guidance on the potential for QE-3 beyond what the most recent Fed statement offered."

The benchmark 10-year note was last down 17/32 in price, yielding 2.12 percent versus Friday's close of 2.06 percent.

This week's auctions start with Tuesday's $35 billion offering of two-year notes.

Copyright Reuters, 2011