NEW YORK: US Treasuries prices gained on Friday as concerns over a possible Greek exit from the euro zone fueled a bid for the safe-haven debt, with investors preparing for what is likely to be volatile trading over the coming month.
Nervousness about Greece's upcoming election and spreading stress on banks to other euro zone countries, such as Spain, helped push benchmark 10-year Treasury yields near their lowest levels in at least 60 years.
These concerns were heightened on Friday after Spain's wealthiest autonomous region, Catalonia, requested help from the central government to refinance its debt.
"This has been an interesting week during which we have seen a number of events shape both the stock and bond markets, but in the end, very little movement or knowledge about the future was gained," said Kevin Giddis, head of fixed income capital markets at Morgan Keegan in Memphis, Tennessee.
"Spain continues to struggle with the ability to tap the capital markets in an effective and useful way while it deals with its own version of the debt crisis. This has caused investors around the globe to become more nervous and as a result, more risk averse.
"I would rate this as a definite positive meter reading for bonds and a negative for stocks, and probably the crux of the current trading pattern," he said.
Benchmark 10-year Treasury notes on Friday traded 11/32 higher in price to yield 1.75 percent, down from 1.78 percent late Thursday but up slightly from 1.72 percent a week ago.
Yields were relatively range bound through the week, with benchmark notes showing the first weekly rise in yield in 10 weeks. However, yields remain not far off the 1.67 percent level reached in September, which was the lowest in at least 60 years.
The US bond market closed early at 2 p.m. (1800 GMT) on Friday ahead of the three-day Memorial Day weekend.
Traders are expecting a volatile month in June. Greece holds elections on June 17 and the US Federal Reserve is expected to indicate whether it is likely to implement further stimulus as its current program, nicknamed "Operation Twist," is set to expire at the end of the June.
"The whole next month is important," said Fidelio Tata, head of US interest rate strategy at Societe Generale in New York.
Expectations of additional volatility are keeping volumes low as many investors stay on the sidelines, wary of getting caught offside in a large move up or down.
"Until market participants have a better feel and better sense of what the next move's going to be, participation remains low," Tata said.
Next week traders will also focus on some key US economic data, including an employment report on Friday, for signs that the economy is weakening, which would make the Federal Reserve more likely to announce new bond purchases.
"A weak number could get people really concerned," said Suvrat Prakash, an interest rate strategist at BNP Paribas in New York, adding "if you have the downside risks from Europe and if you have a second weak payroll number in a row, then you've got the perfect conditions for QE3 or an extension of the Twist program," Prakash said.
Operation Twist involves buying longer-dated debt and funding the purchases with sales of short-dated notes in a bid to reduce long-term borrowing costs and stimulate the economy.
Investors are also wondering whether the Fed might embark on a third round of outright debt purchases, known as quantitative easing, or QE3.
The payroll data is expected to show that employers added 150,000 workers in May. Data on Thursday is expected to show that US gross domestic product grew 2 percent in the first quarter.