MW: Treasurys gain as concerns about Greece aid dollar
Yield curve near flattest this year
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices gained on Monday, pushing yields on 10-year notes lower, as concerns about Greece's finances weigh on financial markets and drive inflows to U.S. government debt.
Gains by shorter-term securities were limited before the upcoming Treasury auctions and amid speculation about what the impact of U.S. health-care reform would be.
Bond strategists at RBS Securities cited "simmering fears about Greece" for the gains.
Yields on 10-year notes (UST10Y 3.66, -0.03, -0.81%) declined 3 basis points to 3.67%. A basis point is 0.01% and bond yields move inversely to their prices.
Yields on 2-year notes (UST2YR 0.94, -0.04, -4.16%) fell 1 basis point to 0.95%.
A summit of European Union leaders this week will be closely watched for signs of whether any aid will be offered to the debt-burdened country, pushing the euro to 10-month lows versus the U.S. dollar. Read more on Greece, dollar.
Starting on Tuesday, the government will sell $118 billion in 2-year, 5-year (UST5YR 2.40, -0.05, -2.20%) and 7-year notes (UST7YR 3.10, -0.05, -1.43%) .
The approach of auctions -- occurring every other week for some time now -- tends to weigh on the broader markets as dealers sell off existing holdings of maturities up for auction in order to get the newest, most liquid securities at a lower price.
Also up for debate is how much the health-care overhaul will affect the U.S. budget deficit and the nation's need for debt financing. See more on health care.
"The political implications for the Democrats of full passage are a continuation of uncertainty into the November elections," said strategists at CRT Capital Group. "Domestic political and policy uncertainty may prove a temporarily supportive force for Treasurys."
The shift has reduced the gap in yields between 2- and 10-year notes to 2.70 percentage points, near the lowest in three months.
The spread has shrank due to a combination of reduced inflation fears and more willingness among investors to move out of the shortest, safest maturities.
At the same time, along with the upcoming auctions, speculation is growing that the Federal Reserve is slowly normalizing its monetary policies and moving closer to adjusting its target interest rate, though not for many months, analysts say. Shorter-maturity debt is more sensitive to changes in monetary-policy expectations.
