By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices extended losses on Friday, reversing the prior session’s rally, after the European Central Bank took a step towards easing funding strains for the region’s banks.
Yields on 10-year notes 10_YEAR +2.65% , which move inversely to prices, rose 4 basis points to 1.67%, after being down slightly through the Asian and European sessions.
A basis point is one one-hundredth of a percentage point.
Yields on 30-year bonds 30_YEAR +1.23% added 3 basis points to 2.72%.
Five-year yields 5_YEAR +3.82% increased 3 basis points to 0.76%.
The ECB said it would accept a broader range of collateral for its liquidity operations, including lower-rated debt and a broader range of asset-backed securities.
“Yields and stocks [are] up after ECB eased collateral rules,” said analysts at Action Economics.
The S&P 500 Index SPX +0.35% extended gains to 0.6% and the euro EURUSD +0.1878% turned up against the U.S. dollar. Both are considered signals that traders see less need for the relative safe-haven status of Treasury bonds. Read more about euro.
Analysts noted a new trading range developing for U.S. bonds in the near future mostly dictated by news about Europe’s sovereign debt crisis.
Yields on 10-year notes are near the mid-point of a range they’ve carved out between the all-time low of 1.44% and 1.72%, they said.
“Treasurys will remain at the mercy of the safe-haven flows driven by the European debate,” said bond strategists at CRT Capital Markets.
Little came out of a meeting of euro-zone finance ministers on Thursday, so attention turns to a mini summit of the leaders of France, Germany, Italy and Spain ahead of the June 28-29 European Union summit.
On Thursday, Treasury prices rose after disappointing economic data from the U.S. and China raised concerns about global growth and worries continued to surround Spain’s banking system. Read about bond rally Thursday.
And earlier this week, the Federal Reserve said it would extend its bond-purchase program known as Operation Twist through the end of the year.
“The balance of risks between the ongoing deterioration in Europe, struggling U.S. and global economies, and a Fed willing to provide some, arguably half-hearted, stimulus via a continuation of Operation Twist have confirmed the current yield range and raised the bar for a sustainable challenge,” the CRT strategists wrote in a note.
For the week, 10-year yields have increased from 1.59% and 5-year yields are up from 0.68%. Thirty-year yields rose slightly from 2.69% last Friday.
Deborah Levine is a MarketWatch reporter, based in New York.
