MW: Treasurys narrowly higher as swine flu feeds flight to safety
Sale of 2-year notes looms, the first of three auctions slated for this week
Treasury prices advanced Monday, pushing yields lower, as investors bought government debt as a safe haven amid worries that an outbreak of swine flu may weigh on any nascent signs of global economic growth.
Government debt pared earlier gains, however, as U.S. stocks recovered and traders eyed $101 billion in note and bond auctions scheduled for this week.
"If we get a bid on the back of the swine flu scare then it would be for us a fade to take on the impending wall of supply," said strategists at RBS Greenwich Capital.
Ten-year note yields ) fell 1 basis point to stand at 2.98%.
The benchmark note's yield had retreated as low as 2.91% earlier in the session.
Yields on the current 2-year note also declined, off 3 basis points to 0.92%.
A basis point is 0.01%. Bond prices move inversely to their yields.
The swine flu outbreak in Mexico has left, at last count, as many as 100 people dead. See related story.
Investors expressed concerns it will hurt the travel-related and airline industries most, much like the SARS scare did in 2003.
Also supporting short-term debt, the Federal Reserve Bank of New York bought $7.025 billion in Treasurys maturing from 2013 to 2016.
Dealers submitted $23.39 billion to be purchased. See results on Fed's Web site.
Starting back in March, the Federal Reserve said it planned to buy $300 billion of Treasury securities in an effort to keep lending rates low and spur economic growth.
Treasurys serve as benchmarks for setting interest rates charged on corporate debt, mortgages, consumer-loan rates on big-ticket items like automobiles, and municipal debt, so keeping yields low is intended to make borrowing on all of those more affordable.
To date, the Fed has purchased $80.81 billion of U.S. debt under this program. The next scheduled operation is for Thursday, when it will buy debt maturing in 2019 to 2026.
With Fed policy makers scheduled to meet on Thursday and Friday, analysts will keep a close watch for any comments they make on the success of the program.
Later in Monday's session, the government will auction $40 billion in 2-year notes, the first of three sales scheduled for this week.
Bids are due at 1 p.m. Eastern time.
"While concerns about a flu epidemic are contributing to the firmer bond markets, supply concerns are likely to help limit the rally," strategists at Brown Brothers Harriman wrote in a note.
On Tuesday, the Treasury Department will issue $35 billion in 5-year notes , followed by $26 billion in 7-year debt.
