LONDON: US Treasury bond prices firmed on Wednesday as a rally in US stocks faltered, with the S&P 500 facing technical resistance after hitting its highest level in four years. * Ten-year US bond yields fell 1.2 basis points to 1.79 percent, while the thirty-year equivalent was 1.2 bps lower at 2.89 percent.
One trader said the 10-year yield had met resistance at 1.86 percent - a 200-day moving average - and minutes from the Federal Reserve's latest meeting would be key to providing the market with fresh direction.
"If we do get any sort of hawkish tone out of the FOMC or no chance of QE (quantitative easing) - which the market is probably expecting there should still be some chance of - then I think the 1.86 (percent level) gets breached," the trader said.
Recent US data has been mixed but chances that the Fed will launch a third round of money printing have risen slightly over the past month to 60 percent, according to a recent Reuters poll that also showed economists lowering economic growth expectations for this year and next..
Expectations the European Central Bank will launch some kind of plan to curb Spanish and Italian borrowing costs as early as September has favored global risk markets at the expense of their safe-haven counterparts in recent weeks.
But there are many uncertainties still at large and the scope for this trend to continue in the near-term could be limited, analysts said.
"There are so many ifs, buts and maybes on various European issues," Philip Shaw, chief economist at Investec said. "The retracement in safe-haven assets has probably been a little bit overdone in the short-term."
The trader said Treasuries could soon get to attractive levels again.
"If we do breach the 1.86 level and we get up to 2 percent again, people are definitely going to use that as an opportunity to buy," the trader added.
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