US Treasuries prices fell on Tuesday, giving up earlier gains, after news Italian Prime Minister Silvio Berlusconi will resign sparked renewed risk taking and reduced the appeal of safe-haven government bonds. Berlusconi, speaking on television, confirmed he would stand down after a new budget law is approved in parliament.
"It's very positive for the euro and very negative for safe-haven bonds," said Richard Gilhooly, interest rate strategist at TD Securities in New York. "He is seen as an impediment to progress and an impediment to putting into place structural reforms." Bonds fell in price on the news and yields rose, with benchmark 10-year notes last yielding 2.08 percent, up from 1.99 percent earlier in the day.
The notes had earlier rallied, boosted by safety buying on concerns over the rapidly deteriorating crisis in the country, which had sent its bond yields to unsustainable levels. The safety bid had also helped demand for the Treasury's $32 billion three-year note sale, which saw the highest bid-to-offer ratio on record. The sale was the first in $72 billion in new supply scheduled for this week.
The Treasury sold the three-year debt at a high yield of 0.379 percent. The bid-to-offer ratio, which measures demand relative to the debt available to buy, was 3.41, reflecting strong demand, analysts said. Demand also is expected to be solid for $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday.
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