Longer-dated Treasuries dip

Prices of longer-dated Treasuries bonds dipped on Monday on signs of progress in the resolution of the European debt crisis and on strong US retail sales. Investors were encouraged to take on some risk on news that Germany and France are "working intensively" on a plan to create a eurozone fiscal union - a step that many consider necessary to avert a breakdown of the single-currency area.
A report by an Italian newspaper that the International Monetary Fund was preparing a rescue plan for Italy further boosted investors' sentiment earlier on the day, sending Treasuries yields to a two-week high. The IMF later denied any such plans. Still, hopes of a solution to the eurozone crisis, coupled with reports of strong US retail sales over the Thanksgiving weekend, spurred a rise on Wall Street, sending the three major Wall Street stock indexes up more than 2 percent and reducing the appeal of safe-haven assets.
"A trio of really good excuses, including strong Black Friday sales, a rumoured IMF 600 billion euro plan for Italy and talk of a Germany willing to issue a common European bond with its poorer neighbours" fed the decline in Treasuries, said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.
Yields paid on 10-year US Treasury notes rose as high as 2.08 percent, the highest level mark since November 14, before later trimming most of the gains. The yields were at 1.967 percent later in the afternoon, compared with 1.97 percent on Friday, while prices for 10-year Treasuries edged lower 1/32. Prices of 30-year US Treasury bonds were down 5/32, with the yield at 2.93 percent, up from 2.92 percent late Friday.
The price of two-year US Treasury notes, however, was up 1/32, with the yield at 0.26 percent. "People got super pessimistic over the past two weeks, and then they thought, 'Maybe it's not as bad as we thought,'" said a trader in New York. "But I don't think the move during the morning was particularly significant, and therefore the retracement this afternoon is not significant either."
Highlighting the challenges for a fast solution to the eurozone crisis, an IMF spokesperson denied a report in the Italian daily La Stampa, which said that up to 600 billion euros could be made available at a rate of 4 to 5 percent to give Italy breathing space for 18 months. Separately, US retailers racked up a record $52.4 billion in sales over the Thanksgiving weekend, a 16.4 percent jump from a year ago, according to an industry trade group.
Treasuries prices were little impacted by data showing sales of new US single-family homes rose in October and the supply of homes on the market fell to the lowest level since April of last year. Sales edgesd up 1.3 percent to a seasonally adjusted 307,000-unit annual rate, which was the fastest pace in five months, though still below analysts' expectations.