Bonds near session lows after ECB cuts rates

NEW YORK: US Treasuries fell on Thursday, expanding early losses after the European Central Bank, in a surprise move, cut interest rates.

The rate cut spurred investor demand for riskier assets, a bid that came at the expense of safe-haven US government debt. Prices of stock index futures rose, pointing to a higher opening on Wall Street.

Benchmark 10-year Treasury notes expanded their loss to 22/32, pushing yields up to 2.07 percent from 1.99 percent late on Wednesday.

The 30-year Treasury bond price expanded its loss to nearly 2 points on the news. Its yield stood at 3.11 percent, up from 3.02 percent late on Wednesday.

The European Central Bank cut its main interest rate by 25 basis points to 1.25 percent as the euro zone's worsening debt crisis outweighed the concern over persistently high inflation.

The cut marked a change in policy course after the ECB increased its rates in July and April, when it became the first major central bank to hike after the intensification of the financial crisis.

ECB President Mario Draghi will explain the central bank Governing Council's decision at a news conference at 9:30 a.m. ET (1330 GMT) -- his first at a monetary policy meeting after taking over the reins on Tuesday from Jean-Claude Trichet.

The ECB also reduced the interest rate on its deposit facility to 0.5 percent and the rate on the marginal lending facility to 2.0 percent.

Markets are now looking for hints whether the ECB is preparing to cut rates again next month.

Copyright Reuters, 2011