NEW YORK: US Treasury prices fell on Tuesday after a long-awaited bailout deal for Greece dented appetite for safe-haven assets, but concern over the implementation by Athens of painful austerity measures moderated losses.
Prices were also undermined ahead of the sale of $99 billion of US Treasuries this week, beginning with $35 billion of two-year notes on Tuesday. Investors often push to cheapen Treasuries going into such sales.
Bonds dipped after euro zone ministers reached agreement on measures to cut Greece's debt to just above 120 percent of economic output by 2020, signing off on the country's second rescue in less than two years and allowing it to meet a bond repayment next month.
Benchmark 10-year notes were trading 6/32 lower in price to yield 2.03 percent, up from 2 percent late Friday, while 30-year bonds were 10/32 lower to yield 3.17 percent from 3.15 percent.
US markets were closed on Monday for the Presidents Day holiday.
"While a Greek bailout has been reached over the long weekend, the process of implementation and final hurdles still pose significant risks and we're also reminded that even with a smooth execution of the deal, it does very little to address the longer-term competitive challenges facing the Greek economy," said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.
Over the medium term, prices were set to remain underpinned by concerns that the austerity measures imposed on Greece will severely weaken its already shrinking economy, making it even harder to repay its debts.
Shorter-dated Treasuries could come under more pressure this week, as in addition to the Treasury selling $35 billion of two-year notes, $35 billion of five-year notes and $29 billion of seven-year notes on Tuesday, Wednesday and Thursday, the Federal Reserve will twice enter the market this week to sell a total of $16 billion to $17.5 billion of shorter-dated notes.
The Fed sales are part of the US central bank's latest stimulus program, dubbed "Operation Twist" under which it is selling shorter-dated securities and buying longer-dated bonds in an effort to lower longer-term borrowing costs.
"Supply will be a focal point this week, both here and in the eurozone," Action Economics said in a note to clients on Tuesday. "New York Fed Twist operations will be bearish on the surface with two buybacks totaling between $3 billion and $4 billion, and two sales for between $16 billion and $17.5 billion."
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