LONDON: US Treasuries fell in Europe on Monday as a perceived reduction in risks to US security after the death of Osama bin Laden boosted equities and prompted some investors to take profits after the recent rally in Treasuries.
US 10-year Treasury futures were down 11/64 at 120-31/32, taking a breather after a near three point rally in the past month to six-week highs. The 10-year yield in the cash market was up 2 basis pints at 3.309 percent.
But the market continues to be underpinned by expectations the US Federal Reserve will stick to a near-zero rate policy into 2012, which limited the drop in debt prices following the revelation of Bin Laden's death by US President Barack Obama.
‘We have some risk appetite coming back into the market after the news on Osama bin Laden. That's what's been driving the market in the European session, but we have a lot of economic data coming up this week so we could see renewed focus on US macro data again,’ said Nordea analyst Niels From.
‘Are we going to see US data on the weak side? If we do there's still a bit of space for US yields to fall further but I can't really see Treasury yields breaking below the lows seen in March -- below 3.20 percent in the 10-year area -- unless we get really weak data.’
Some market participants said the downward pressure on bond prices on Monday allowed some daelers to square their positions before a series of Federal Reserve speakers this week and the April US payrolls data on Friday.
The payrolls report is forecast to show jobs growth easing but unlikely by enough to alter a downtrend in US bond yields.
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