US Treasuries prices fell in late trading on Wednesday after Moody's Investors Service placed the United States on review for possible downgrade, which could strip its prized AAA-rating. The credit ratings agency cited the growing risk that Washington could fail raising its $14.3 trillion government debt limit "on a timely basis."
Benchmark 10-year Treasury notes last traded down 8/32 in price with a yield of 2.91 percent, up 3 basis points from late on Tuesday, according to ICAP. Federal Reserve Chairman Ben Bernanke signalled before Congress that he would be ready to inject more stimulus if the US economy and inflation slow much more.
"Bernanke was quite dovish," said Larry Dyer, head of US rates strategy in HSBC Securities USA in New York. "The economy is stuck in a ditch. It's not getting out of the ditch anytime soon." The Treasuries market was considered overstretched and was poised for a pullback after benchmark notes booked their strongest three-day advance since May 2010.
The pullback, however, proved short-lived after a successful 10-year note sale following Tuesday's solid three-year sale. The US Treasury Department will complete this week's $66 billion in coupon-bearing supply on Thursday with a $13 billion reopening of a 30-year bond issue originally sold in May.
Fitch's downgrade of Greece deeper into junk territory rekindled anxiety that Europe's fiscal woes could spiral into a global crisis, causing some traders to close out earlier bets against Treasuries. Benchmark 10-year Treasury notes last traded unchanged in price at 102-3/32 to yield 2.88 percent. The 10-year yield was up 2 basis points from late Tuesday. The 10-year yield touched a session high of 2.96 percent after hitting 2.82 percent on Tuesday, which was the lowest since early December. Thirty-year Treasury bonds closed up 3/32 in price to yield 4.16 percent after touching a session high of 4.25 percent.