US Treasuries are seen likely to continue recent gains, even as prices slipped on Wednesday, as interest rate fears and worries that policymakers will be too slow to raise the debt ceiling may be overstated. Treasuries prices fell in light volumes as strong US corporate earnings and good demand at Spanish bond auctions helped spur renewed risk taking, sending stocks higher.
Some fears that the US could default on its debt if Congress doesn't raise the debt ceiling have also weighed on bonds, though analysts see a default as unlikely. "We think there is going to be a deal on the deficit," said Richard Gilhooly, interest rate strategist at TD Securities in New York.
Meanwhile Treasuries may also be pricing in excessively high expectations that the Fed will be quick to raise interest rates after it ends its quantitative easing program in June. Fed Chairman Ben Bernanke is likely to state that rates will stay low when the central bank meets next week, despitemore hawkish testimony from other Fed members, Gilhooly said.
The notes traded at 3.40 percent on Wednesday, up from Tuesday's close of 3.37 percent. In the when-issued market, traders expected the new five-year Treasuries due April 2016 to clear at a yield of minus 0.209 percent. This compared with a yield of minus 0.550 percent on the five-year Treasuries sold last October.
Comments
Comments are closed for this article.