US Treasuries finished little changed in price on Wednesday as conflicting reports on Greece's progress to secure a second bailout muddied the outlook for Europe's debt crisis. The market was little impacted after minutes from the Federal Reserve's January policy meeting, released on Wednesday afternoon, showed a few central bank officials felt another round of bond buying would be needed before long to support the US economy.
Treasuries remain anchored near the centre of a range that has held for over three months on uncertainty over sovereign debt auctions in Europe. "The investment community is still struggling to find sturdy footing as the tug-of-war over Europe's financial path ahead remains so uncertain. You would be well-advised to expect that to continue to be the case for the foreseeable future," said Kevin Giddis, managing director of fixed income at Morgan Keegan in Memphis, Tennessee.
Benchmark 10-year Treasury notes traded steady in price to yield 1.93 percent, very near the middle of a range of 1.79 percent to 2.17 percent that has held since early November. "There's a little nervousness about Greece, but the market seems pretty well conditioned to this," said Steve Van Order, a fixed-income strategist at Bethesda, Maryland-based Calvert Investment Management with more than $14.5 billion in assets under management.
"Even if Greece left the euro the reaction might be fairly short-lived as long as Italy and Spain don't have trouble borrowing money." Those two countries appear to be selling debt with ease. Italy's three-year borrowing costs hit their lowest since March 2011 at an auction on Tuesday, with a sovereign ratings cut by Moody's Investors Service having little impact as cheap ECB loans continued to support demand and ease its path toward an ambitious refinancing goal.
Spain and Belgium were both caught by Moody's downgrade of six euro zone states but saw their cost of funds fall further at bill sales on Tuesday. Even Greece - seen at risk of a chaotic default next month - managed to place three-month paper. Investors are also trying to handicap the effects on US interest rates from firmer US economic data and weaker measures on European growth, O'Donnell said. Thirty-year Treasury bonds traded 5/32 lower in price with yields little changed from late Tuesday at 3.09 percent.