NEW YORK: US Treasuries prices rallied on Tuesday as doubts over whether Europe could commit enough resources to arrest the region's deepening debt crisis revived the bid for safe-haven US government debt.
The euro zone was on edge on the eve of a summit meant to confront the currency bloc's worsening sovereign debt crisis.
Disputes raged in Rome and Berlin over details of a plan to reduce Greece's debt burden, fortify European banks to withstand bond losses and boost the euro zone rescue fund to prevent market contagion. For more, see:
The consequent popularity of safe-haven US debt fortified the bid in an auction of $35 billion in two-year Treasury notes, where non-dealer bidders grabbed 47.4 percent of the sale.
That topped the 45 percent norm, said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.
The value of bids offered exceeded the amount accepted by a 3.64 ratio, more than the average 3.36 ratio of the four most recent auctions and the average 3.21 ratio so far this year.
Given that the Federal Reserve will sell as much as $18 billion of securities maturing in 2013 and 2014 this week, "this auction went quite well," said Jefferies & Co money market economist Thomas Simons.
After the sale, the market traded "extremely well," said Cantor, Fitzgerald interest-rate strategist Justin Lederer.
In late trade, benchmark 10-year Treasury notes were up 1-1/32 in price, their yields falling to 2.12 percent from 2.23 percent late on Monday.
The 30-year bond jumped 2-26/32, its yield falling to 3.14 percent from 3.27 percent on Monday.
Weaker-than-expected US data on home prices and consumer confidence reminded investors of the uncertain outlook for the US economy, feeding the bid for safe-haven US debt.
Standard & Poor's-Case-Shiller said US home prices in 20 cities were unchanged in August while the Conference Board said its US consumer confidence index fell to 39.8 in September, the lowest since March 2009.
A regional manufacturing survey from the Fed Bank of Richmond also looked sluggish.
The Treasury will sell $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday.
This week's three coupon note sales will raise nearly $42 billion in cash for the government, after it repaid $57 billion in maturing debt.
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