Treasuries move up

US Treasury debt prices rose on Monday and benchmark yields fell, hovering just above historic lows, on bets that the Federal Reserve will embark on large-scale bond purchases to stimulate a sluggish US economy. Several senior Fed officials on Monday made the case the central bank should do more to lower the unemployment rate, which remained stuck at 8.2 percent in June.
Disappointing domestic job growth, together with Europe's debt crisis and China's slowing business activity, have increased speculation the US central bank is preparing to embark on a third round of quantitative easing to spur borrowing and demand, analysts said.
"Economic momentum is trending lower," said Sharon Stark, chief fixed income strategist at Sterne Agee & Leach in Birmingham, Alabama. "Traders are preparing for another round of quantitative easing after three straight months of below-consensus jobs growth."
Wall Street economists see a 70 percent chance the Fed will engage in a third round of quantitative easing, nicknamed QE3, according to a Reuters poll conducted shortly after the June payrolls report on Friday.
The US Labour Department said on Friday US employers added 80,000 jobs in June, below the 90,000 predicted by economists polled by Reuters.
San Francisco Fed President John Williams said, "We stand ready to do what is necessary to attain our goals of maximum employment and price stability."
With renewed appetite for bonds, the Treasury is expected to benefit from strong demand for $66 billion in sales of new coupon-bearing debt this week, analysts said. The Treasury will sell $32 billion in three-year notes on Tuesday; $21 billion in 10-year debt on Wednesday and $13 billion in 30-year bonds on Thursday.
Benchmark 10-year US Treasury notes last traded up 12/32 in price for a yield of 1.52 percent, down 3 basis points from late on Friday. The 10-year yield is about 8 basis points above the level set on June 1, which was the lowest going back to the early 1800s, according to data gathered by Reuters.
Thirty-year bonds rose 1-2/32 to yield 2.62 percent, down 4 basis points from Friday's close. The 30-year yield was hovering at its lowest level in about a month and 11 basis points above its record low set in early June in reaction to poor May jobs data.
While jobs growth has slowed in recent months, however, some investors reckoned economic conditions had not yet deteriorated enough for the Fed to begin buying more Treasuries or mortgage-backed securities.