Reuters: Economic News: Bond prices rise again after last week's rout

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Bond prices rise again after last week's rout Mar 23rd 2012, 20:01 U.S. Treasury Secretary Timothy Geithner speaks during a news conference on the state of financial reform at the Treasury Department in Washington February 2, 2012. Credit: Reuters/Yuri Gripas By Richard Leong NEW YORK | Fri Mar 23, 2012 4:01pm EDT NEW YORK (Reuters) - Treasury debt prices rose for a fourth straight session on Friday as nagging concerns about Europe's debt problems and jitters about slowing global growth stoked demand for low-risk government debt. Benchmark yields were on track to fall 6 basis points for the week, retracing about 25 percent of last week's spike, which was the biggest one-week rise since late June 2011. The bulk of Friday's Treasuries buying was tied to short-covering as traders reduced their bets against U.S. government debt in case of negative fiscal news from Europe and the Middle East over the weekend, traders and investors said. "There's a little more concern about Europe. The market has retraced from its recent high yields. It has found some footing here," said Sean Murphy, a Treasury trader at SG Americas Securities in New York. After Greece clinched its debt restructure earlier this month in a bid to avert a messy default, traders began speculating whether Portugal and Spain would need bailouts if their governments fail to reduce their spending and debt loads. The euro zone's festering debt situation has been mitigated by an improving outlook on the United States, which the Federal Reserve acknowledged at its policy meeting last week. The Fed's modest upgrade of its view of the U.S. economy was one of the catalysts that caused last week's sell-off, catapulting longer-dated Treasuries yield to 4 1/2-month highs. U.S. long-term government bond funds saw a $1.01 billion drop in assets, the biggest one-week outflow in at least five years, data firm EPFR said. The swift rise in yields breached 200-day moving averages of medium- and long-dated maturities, sparking a debate whether the Treasuries market is at the precipice of a prolonged decline. But the optimism on the U.S. economy was tempered this week after a mixed bag of data that challenged the notion that the struggling housing sector might be poised for a rebound. On Friday, the government reported new home sales unexpectedly fell 1.6 percent in February, while prices rose to their highest in eight months. On Thursday, surprisingly weak business readings in Europe and China also undermined investor sentiment and spurred selling in stocks and other growth-oriented investments, analysts said. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic - U.S. new home sales: link.reuters.com/qyj37s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> STABILIZING AT HIGHER YIELDS The revived appetite for U.S. Treasuries bodes favorably for the $99 billion in coupon debt supply next week and the trend is temporarily quelling talk of a dire future for bonds. Bill Gross, who manages the world's biggest fund at PIMCO, said on Friday via Twitter the bond bull market "may be dead," but a bear market "remains in the distance." The benchmark 10-year U.S. Treasury note gained 12/32 in price to 97-28/32 to yield 2.239 percent, down 4 basis points from Thursday and down 6 basis points on the week. The 10-year yield was above its 200-day moving average of 2.2243 percent but below its 4 1/2-month peak of 2.399 percent set on Tuesday, according to Tradeweb. The 30-year bond shot up 29/32 in price at 96-7/32 for a yield of 3.31 percent, down 5 basis points on the day and 9 basis points on the week. The 30-year yield ended below its 4 1/2-month high of 3.4920 percent on Monday and its 200-day moving average of 3.3760 percent. The Federal Reserve's ongoing purchases of long-dated Treasuries, as a part of its $400 billion "Operation Twist" bond program, should help stabilize yields at these higher levels, fund managers said on Friday. "We have created a new range," said Mike Mata, who oversees $24 billion in bonds at ING Investment Management in Atlanta. "A lot of the tail risk from Europe has been priced out." A number of analysts and investors said the 10-year yield would trade in a range of 2.10 to 2.40 percent, about 25 basis points higher than previous trading range. (Additional reporting by Ellen Freilich; Editing by Jan Paschal) Link this Share this Digg this Email Reprints

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