Bonds up as Greece, Spain concerns feed bid

NEW YORK: US Treasuries prices firmed on Friday as concerns about the debt situations in Greece and Spain fed investors' appetite for safe-haven US government debt.

Disagreements on how to tackle Greece's debt and concern that Spanish regional elections might reveal undisclosed debt in local governments led the bid.

Widening spreads between German and peripheral euro-zone bond yields offered further evidence of those concerns.

Many economists say worse-than-expected regional budget figures from Spain could start to trickle out after Sunday's vote.

‘This is pushing the euro lower, periphery debt wider, and stocks lower. Thus, European bunds and US Treasuries are rallying,’ said John Briggs, Treasury strategist at RBS Securities.

Benchmark 10-year notes were up 2/32, their yields at 3.175 percent, little changed from Thursday and unchanged from a week ago.

The Treasury will sell $99 billion in coupons in 2-year, 5-year, and 7-year notes and traders said that could give prices a little downward bias early next week.

‘The supply next week will keep a lid on the market,’ said Thomas di Galoma, managing director of government securities at Oppenheimer & Co in New York.

But uncertainty about the economic outlook has weakened any selling conviction. No new government economic data is due on Friday to give the market fresh trading direction.

Two-year notes unchanged, their yields at 0.53 percent. Five-year notes were up 3/32, their yields easing to 1.81 percent from 1.83 percent late on Thursday.

Minutes from the Federal Reserve's April policy meeting, released on Wednesday afternoon, showed a few central bank officials saw a rise in inflation risks that suggested tightening of monetary policy might be necessary sooner than was currently anticipated.

In its policy statement last month, the Fed said rising price pressures were expected to be transitory.

Meanwhile, the cost to hedge against a US government debt default rose on Friday to its highest level since January as worries persisted over Washington's struggle to raise its $14.3 trillion legal borrowing limit.