Treasuries decline

US government debt prices fell on Thursday after Greek leaders agreed to tough fiscal and austerity measures needed to secure critical bailout funds, cutting the safety bid for bonds. Uncertainty over the demand for an upcoming $16 billion auction of 30-year bonds and new data on jobless claims indicating further improvement in the US labour market also drove selling.
The 30-year yield rose to its highest level since mid-November, while benchmark 10-year yields hovered at about two-week highs, according to Tradeweb. "The driver right now seems to be Greece. If the Greek deal is real, some of the safe-haven positions might be eliminated," said Alex Manzara, vice president at TJM Futures in Chicago.
Greek leaders clinched a long-stalled deal on reforms and austerity measures needed to secure a bailout and avoid a messy default, hours before the country's financial backers were to meet in Brussels on Thursday. Markets have feared that without another round of aid Greece would default on its debt, causing chaos akin to the global credit crunch that was triggered by the collapse of Lehman Brothers in 2008. "It looks like the crisis is contained for now," said Brian Rehling, chief fixed-income strategist at Wells Fargo Advisors in St. Louis, Missouri.
A mediocre 10-year sale on Wednesday raised concerns about the appetite for the 30-year bond offering, even as the Federal Reserve has been buying longer-dated Treasuries in an effort to hold down mortgage rates and other long-term borrowing costs. On Thursday, the Fed bought $4.95 billion in Treasuries due in 2018 to 2019, as a part of its $400 billion "Operation Twist" program designed to push down long-term interest rates and spur the economy. The 30-year bond was down 25/32 in price at 98-25/32 with a yield of 3.19 percent, up 4 basis points from Wednesday's close.
The 30-year yield is testing a "triple-top" support in the 3.18 percent area. If it closes above this level, some analysts say it is poised to rise further and test the 3.45 percent level, the next major chart support. The five-year note was down about 3/32 with a yield of 0.85 percent, up 2 basis points. The five-year yield rose to its highest levels in about two weeks and was testing its 50-day moving average as technical support. The yield on the 10-year note issue auctioned on Wednesday was up 2 basis points at 2.04 percent.