Treasuries rise

US Treasury debt prices rose on Monday as Germany poured cold water on hopes of a quick solution to the European debt crisis, driving investors back into safe-haven assets. US 30-year Treasuries jumped more than 2 points in price as key US stock indexes closed about 2 percent lower. Yields on benchmark 10-year notes fell, after finishing on Friday at their highest level since late August.
Investors sold off risky assets globally after German Finance Minister Wolfgang Schaeuble cautioned that a summit of EU leaders next Sunday would not yield a "definitive solution" to the region's debt crisis. Treasuries prices have been falling in the past few weeks on hopes of a definitive solution to the eurozone debt crisis and on some better-than-expected US economic data.
But demand for safe-havens should be rising again unless EU leaders come up with a clear plan to stop the Greek crisis from spreading further, said Andrew Richman, fixed-income strategist at SunTrust Private Wealth Management at Palm Beach, Florida. That plan should include specifics such as the size of a Greek debt haircut, the impact on banks and how much capital would be necessary to protect those banks, he said.
"They need to do that, they need to get a big bazooka like we had here in the US," Richman said, referring to the approach adopted by former US Treasury Secretary Hank Paulson during the 2008 financial crisis. "In Europe, they go very measured, very slowly, and the markets don't like that." Benchmark 10-year US Treasuries rose 27/32 in price to yield 2.16 percent, coming off seven-week highs. On Friday, yields closed at 2.25 percent.
US 30-year bonds traded up 2-08/32 in price to yield 3.13 percent against 3.23 late Friday. Recent data continued to suggest the United States is not heading into another recession despite a worse-than-expected reading from the New York Federal Reserve's Empire State index. The index, which gauges manufacturing in the state, came in at -8.48 in October, compared with market forecasts of -4.0. The components, however, were not as bad as the headline number.
US industrial production for September, meanwhile, rose 0.2 percent last month, in line with market expectations. Mixed earnings in the US financial sector added to risk aversion after Citigroup Inc reported higher third-quarter earnings while Wells Fargo & Co earnings came in below market forecasts. Overall, bearish momentum on Treasuries is alive and well unless a major setback in Europe occurs unexpectedly, other analysts said.