NEW YORK: US Treasuries prices fell on Tuesday as investors took profits after recent gains and continuing uncertainty in Europe kept fund managers on the sidelines.
Traders also prepared for supply of $99 billion in new two-year, five-year and seven-year notes this week. The Treasury is expected to see strong demand for its $35 billion sale of new two-year notes on Tuesday.
Treasuries yields have fallen to levels that are near their lowest in at least 60 years as fears that Europe will see a new leg of funding stresses added demand for safe haven US debt.
With few new headlines, however, many investors are undoing trades to benefit from recent gains and are waiting on new information over how leaders in the region will address the crisis.
"Nothing has happened in the last couple of days. The market was very high, it was well bid, and all you're seeing now is just some people taking profits out of Treasuries and killing their shorts in equities," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia, in New York.
Traders will next focus on an informal summit of EU leaders in Brussels on Wednesday, where France's Francois Hollande will push a proposal for mutualising European debt.
Germany is likely to oppose any early move, saying that more progress is needed on coordinating fiscal policies across the euro zone.
Uncertainty over whether Greece will seek to exit the euro zone and how bad any new bank stress in the region will become is likely to keep many investors reluctant to take new positions, especially as Treasury yields trade near historically low levels.
"One of the things that is very difficult is that we don't know what's happening, a lot of people moved to the sidelines because of the lack of clarity of what's going on," said Comiskey.
Benchmark 10-year notes were last down 13/32 in price to yield 1.79 percent, up from 1.74 percent on Monday. They are now 12 basis points higher than yields of 1.67 percent reached last September that were their lowest in at least 60 years.
The Federal Reserve will also sell as much as $8.75 billion in notes due next year on Tuesday as part of its Operation Twist program. This program involves buying longer-term debt and funding the purchases with sales of short-dated debt in a bid to lower long-term borrowing costs.