U.S. could sell 2-year notes at highest yield since July
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices declined Tuesday, pushing yields up, but the decline was limited as analysts raised concerns about the euro-zone’s long-delayed second bailout package to Greece.
The session’s main event for the bond market will be the government’s auction of 2-year notes 2_YEAR +1.68% .
Yields on 10-year notes 10_YEAR +1.55% , which move inversely to prices, rose 4 basis points to 2.04%, after touching 2.05% during European trading hours. A basis point is one one-hundredth of a percentage point.
Thirty-year yields 30_YEAR +0.79% increased 3 basis point to 3.18%.
Five-year yields 5_YEAR +2.52% added 3 basis points to 0.89%.
U.S. bond markets were closed Monday for President’s Day.
“Treasurys were under pressure overnight on the Greek bailout, but admittedly the market is trading better on the news than we might otherwise have expected,” said David Ader and Ian Lyngen, bond strategists at CRT Capital Group.
For the longer term, they said, “the obvious risk is that Greece could still need additional bailouts or restructuring.”
In a marathon meeting Monday, finance ministers and other top European officials agreed to provide up to 130 billion euros ($171.9 billion) of extra financial aid to Greece.
Private-sector bondholders will take a haircut of more than 53% on around €200 billion worth of privately held Greek government debt, and Europe’s national central banks agreed to forego any profits on their holdings of government bonds. Read more on Greece’s bailout deal.
But after a brief relief rally in riskier assets including stocks, markets pared their moves as analysts pointed out that Greece’s economy may not meet growth projections because of austerity measures taken to attain the financial aid.
“Greece simply cannot and will not meet its existing debt burden, even one that has been ‘voluntarily’ reduced,” said Dan Greenhaus, chief global strategist at BTIG. “It is only a matter of time until this matter is revisited with an outcome equally uncertain.”
Selloffs in the bond market have been limited and only taken yields up to technical support levels because of “positive flow into Treasurys that comes from the lack of high quality dollar fixed-income alternatives in a world that questions whether many sovereign bonds in the world are actually safe,” said Bill O’Donnell, head of Treasury strategy at RBS Securities.
For 10-year yields, the level to watch is 2.10%, he said. Two-year and 5-year note yields are near support levels as well, at 0.3% and 0.9%, respectively.
