Treasuries slip

Treasuries prices slipped on Tuesday though volumes were light in what could be the lull before the storm as investors wait on key events in the eurozone planned for later this week. The European Central Bank is expected to cut interest rates and offer ultra-long liquidity operations to support banks when it meets on Thursday.
The meeting will be followed by the European Summit on Friday, which investors are closely watching for signs that leaders will deliver a sweeping solution to contain the region's fiscal problems. "It seems a lot of accounts are in a wait and see mode, knowing that the next seven or eight trading days starting on Thursday should be fairly active," said Jason Rogan, director of Treasuries trading at Guggenheim Partners in New York.
Volumes are also expected to pick up next week as the Treasury sells new three-year, 10-year and 30-year Treasuries, and five-year Treasury Inflation-Protected Securities (TIPS). The Federal Reserve will also release minutes from its latest policy meeting on Tuesday. Treasuries prices accelerated losses and yields hit session highs on Tuesday afternoon after the Financial Times reported that European negotiators were in talks to create more firepower for Europe's rescue fund, which could include two rescue funds for the troubled region.
The US debt yields stayed within recent ranges, however. Benchmark 10-year Treasuries have largely traded between 1.90 percent to 2.10 percent since the beginning of November. They last traded down 5/32 in price to yield 2.08 percent, up from 2.03 percent late on Monday.
The safe-haven bid for bonds has overpowered any sell-off as US economic data improves. Treasuries were little moved by Standard & Poor's warning late on Monday that it may cut the ratings of 15 eurozone countries including top-rated France and Germany, though the bonds temporarily gained a bid before the statement on rumours that the rating agency was about to act.
On Tuesday, S&P said it is also considering stripping the AAA rating of the European Financial Stability Facility, the region's bailout fund, if the majority of the 17-member eurozone block were downgraded. Investors are hoping eurozone members will agree on a cohesive structure on fiscal integration. This step would likely result in the European Central Bank acting as backstop for peripheral government debt and the International Monetary Fund helping to finance struggling nations. On the supply front, the US Treasury sold $35 billion in four-week bills to record demand, resulting in an interest-free loan for the government from investors. The Fed also bought $2.51 billion in bonds due between 2036 and 2041 on Tuesday as a part of its $400 billion "Operation Twist" aimed at lower long-term interest rates to help the economy.