MW: Treasurys fall as Europe debt deal takes shape
TIPS, sale, details on next week’s auctions on tap
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices fell on Thursday, pushing yields higher, following media reports about a draft plan for the European Financial Stability Facility to provide more support to Greece.
The news of some agreement among European leaders to continue supporting debt-laden euro-zone countries left investors relieved and made them more comfortable moving into riskier assets again and away from the relative safe-haven status of U.S. bonds and the dollar.
Yields on 10-year notes 10_YEAR +2.39% , which move inversely to prices, rose 6 basis points to 2.98%. A basis point is 1/100th percentage point.
Thirty-year-bond yields 30_YEAR +1.72% gained 6 basis points to 4.31%.
Yields on 2-year notes 2_YEAR +4.17% added 1 basis point to 0.39%.
“The softness given the European headlines are a hint of what a deal, any deal, might do the market,” said David Ader, head of government bond strategy at CRT Capital Group.
Lower rates proposed
According to a draft plan released early during U.S. trading hours, European leaders would agree to reduce the interest rate paid by indebted countries on loans from the European Financial Stability Facility. They would also extend loan maturities, according to Dow Jones Newswires.
Click to Play
News Hub: Jobless claims inch up
TWSJ's Paul Vigna reports initial unemployment claims inched higher last week. Also, the News Hub panel discusses newly released corporate- earnings reports. AP Photo/Tony Gutierrez
The plan would apply to loans given to Ireland and Portugal in addition to those extended to Greece, reports said.
U.S. stocks rose, with the Standard & Poor’s 500 Index SPX +1.39% gaining 1.2%. The euro EURUSD +1.25% rose about 0.6% against the dollar. Read more about Europe’s plan for Greece, the dollar.
Still, the U.S. economy doesn’t seem to be on solid ground yet, which had kept Treasurys in demand.
“Ten-year notes have not pressed too far below 3%, but global uncertainty is high and risk aversion may return quickly,” said bond strategists at RBS Securities.
Indeed, the U.S. Labor Department said Thursday that first-time jobless claims rose in the latest week to 418,000. Read about jobless claims.
Yet yields rose a little after the Philadelphia Federal Reserve’s index on manufacturing activity in the region rose to positive territory this month, coming in stronger than analysts polled by MarketWatch expected.
Still to come is an announcement at 11 a.m. Eastern Time of how much in debt the government will auction next week.
Also, the Treasury Department will sell $13 billion in 10-year inflation-linked debt at 1 p.m. Eastern.
Research firm Wrightson ICAP expects the U.S. to keep its auction sizes constant from last month and sell $35 billion in 2-year and 5-year notes 5_YEAR +3.60% and $29 billion in 7-year debt 7_YEAR +3.00% .
