US Treasuries prices were little changed on Monday, as gains on Wall Street offset fears over contagion from Greece's fiscal crisis, slowing the bond market's momentum for a further decline in yield. Bond prices rose overnight after eurozone ministers said the heavily-indebted eurozone nation had to approve stricter austerity measures before a final decision would be made on extending another 12 billion euros in loans.
The prospect Athens will receive aid from European neighbours was first perceived as a negative development. Traders later concluded it will obtain enough help by year-end to avert a default. "If anyone is planning to go long here in bonds, Greece is going to have to implode and that's not going to happen," said Mike Franzese, head of Treasury trading at Wunderlich Securities in New York.
Less anxiety over Greece and resilience in the stock market with the S&P 500 bouncing off its 200-day moving average proved enough to hold benchmark 10-year yields above a technical resistance level. Benchmark 10-year notes last traded down 4/32 in price to yield 2.96 percent, up from 2.94 percent on Friday. Monday's closing yield level was the 38.2 percent Fibonacci retracement level from the peak in April 2010 and the trough October 2010.
The 10-year debt encountered stiff chart resistance at 2.88 percent, the lowest yield since the beginning of December and a level that was tested last week. Monday's trading volume was slightly above its 30-day average, according to Tradeweb. A further drop in Treasury yields depends on an escalation in investor fear over the Greek situation or signs of significant weakening in the US economy.
The Fed's Treasuries buying for a $600 billion program, known as QE2, will end on June 30. The most liquid parts of the bond market could also be boosted in the coming weeks by demand from banks and dealers tidying their balance sheet through quarter-end, according to analysts at J.P. Morgan.
Short-dated Treasuries and the 30-year bond fared better than intermediate issues. The two-year note was flat in price for a 0.375 percent yield, down almost 0.5 basis point on the day, and the long bond ended up 4/32 with a yield of 4.198 percent, down 0.5 basis point from late Friday.