Treasuries drift mostly lower

Most US Treasuries prices slipped on Wednesday as steps to resolve Europe's debt crisis drew investors to riskier assets such as stocks - to the detriment of safe-haven US government debt. Data showing that US retail sales were flat in August and a well-bid 30-year Treasury bond auction fuelled some short-lived gains, but steady stock market gains that propelled major indexes up by more than 1 percent left bonds in a downward drift.
"Weaker-than-forecast retail sales figures and a delayed vote on changes to the euro zone's EFSF bailout fund by an Austrian parliamentary panel did generate a bit of a safe-haven bid this morning," said John Canavan, market analyst at Stone & McCarthy Research Associates in Princeton, New Jersey. Outside of that, however, a "moderately weak tone" prevailed in the bond market throughout the day, briefly interrupted when the 30-year Treasury bond auction stirred a bid, mainly in that sector of the curve.
In late trade, benchmark 10-year Treasury notes were down 3/32, their yield at 2.01 percent, while 30-year bonds were up 19/32, their yield at 3.29 percent. With the exception of the 30-year bond, Treasuries traded in fairly narrow ranges as steps to resolve Europe's debt crisis overcame fears that Greece could default on its debt.
Europe's top bureaucrat said plans for a common eurozone bond, seen by many as a key tool to ease the region's festering debt crisis, would soon be presented. Also, leaders of France and Germany told Greek Prime Minister George Papandreou it was vital to implement reforms and meet fiscal goals set under a July 21 bailout plan, but also said that Greece's future was in the eurozone.
"The strong comments of support from France and Germany helped to support risk assets this afternoon, adding to the pressure on Treasuries," Canavan said. Meanwhile, bond market participants are largely on hold ahead of next week's two-day Federal Reserve policy meeting, Canavan said. "The 10-year yield reached a modern era record low just two days ago; now it's really about positioning ahead of the FOMC outcome," he said.