LONDON: US Treasuries held steady in Europe on Thursday with investors wary of putting on big bets amid uncertainty whether the European Central Bank will meet high expectations of bold crisis-fighting measures at its policy meeting later in the day.
Bond investors were focused on the ECB after the Federal Reserve took no new monetary measures at its monthly meeting on Wednesday, although a more downbeat tone on the economy kept alive hopes of more future bond buying by the US central bank.
ECB President Mario Draghi raised expectations of new measures to fight the euro zone's three-year-old debt crisis when he promised last week to do whatever it takes to preserve the euro, within the central bank's mandate. But market misgivings that he might have over-promised are growing.
"People aren't willing to place large bets either duration- or curve wise. People are pretty neutral and we saw with ADP (jobs data) and even the FOMC meeting that Treasuries are clearly getting their direction from expectations out of the ECB," said Craig Collins, a trader at Bank of Montreal.
"It's a real wild card what we're going to get ... The market is clearly pricing in that the ECB is going to be buying peripheral bonds, and in what form and how remains to be seen.
"Anything less than aggressive buying is going to be disappointing for the market."
US 10-year T-notes were last up 1/32 in price to yield 1.52 percent, stabilising around late New York levels. Collins said the benchmark yield could fall to 1.42 percent, near record lows of 1.38 percent plumbed early last week, if the ECB fails to deliver.
"If they come with bazooka-style liquidity provisions then 10s could trade north of 1.65 so the back end is definitely more vulnerable to what goes on with the ECB," he said.
The 30-year T-bond was slightly lower in price to yield 2.599 percent, up from 2.588 percent in Wednesday's late US trade.
The Treasury Department will next week sell a combined $72 billion in coupon-bearing debt as part of its August refunding. That will include sales of $32 billion in three-year notes ; $24 billion in 10-year debt and $16 billion in 30-year bonds.
The sales are expected to raise $17 billion in new money, to be used to refund investors on $54.2 billion worth of maturing government debt.
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