By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices pared losses in early U.S. trading Monday, briefly pushing yields lower, as the market’s debt-crisis focus turned to upcoming votes by Congress on the compromise brokered to end the standoff.
“More hand-wringing lies ahead as we await approvals in the Senate and the House — votes that most see coming late today,” said strategists at RBS Securities. “After that, attention will likely turn to the ratings agencies to see how they’ll weigh in on the deal.”
Yields on 10-year note 10_YEAR +0.43% , which move inversely to prices, added 1 basis point to 2.81%, after rising to 2.86% in European trading hours. A basis point is 1/100th of a percentage point.
Thirty-year bond yields 30_YEAR +0.87% stayed up 3 basis points at 4.15%.
Yields on debt maturing in under seven years were little changed. Two-year yields 2_YEAR -1.08% sat at 0.36% — within hailing distance of the all-time low of 0.31% hit in November.
The agreement reached by President Barack Obama and congressional leaders late Sunday would raise the government’s debt limit and cut spending by around $2.4 trillion. See more on U.S. debt deal.
But analysts still want to know if the major credit rating agencies — Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings — will say the deal does enough for now for the U.S. to keep its AAA rating. Read story about rating agencies, U.S. credit rating.
Analysts also noted that recent economic data has come in soft and supported market demand for U.S. debt as they traditionally perform better during periods of economic weakness than assets that rely on growth more, including stocks, emerging markets and energy commodities. And that may continue to support bonds. Read why Treasury bonds remain a safe haven.
A report later in the session is expected to show U.S. manufacturing activity slowed in July and the government’s monthly jobs report on Friday may show hiring remains too slow to accelerate growth.
“We have a data-laden week ahead of us and given our bias to focus on the fundamentals and see a bullish spin,” said bond strategists David Ader and Ian Lyngen at CRT Capital Group.
On Friday, bonds rallied — pushing 10-year yields down the most since June 2010 — as the debt crisis escalated in Washington and the potential for a downgrade of the U.S.’s benchmark AAA rating sapped interest in riskier assets. Also, a report showed the U.S. economy grew slower than expected in the second quarter, sending 10-year yields down almost 15 basis points. See more on Friday’s bond rally.
“We are most open to a continuation of the overnight weakness not so much because it makes sense, but seems the easy response to unwind some of Friday’s froth,” CRT Capital’s Ader and Lyngen wrote in a note.
