By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices fell on Tuesday after reports that European Central Bank President Mario Draghi gave more details about what the ECB may do to ease the sovereign debt crisis.
Yields on 10-year notes 10_YEAR +1.02% , which move inversely to prices, rose 2 basis points to 1.58%. A basis point is one one-hundredth of a percentage point.
Yields on 30-year bonds 30_YEAR +0.56% added 2 basis points to 2.69%. Five-year-note yields 5_YEAR +3.72% rose 1 basis point to 0.61%.
U.S. bond markets were closed Monday for Labor Day.
Late Monday, the ECB president told members of the European Parliament, behind closed doors, that purchases of bonds with maturities of up to three years would not constitute central-bank financing of state deficits, news reports said, citing lawmakers. Read story on Draghi, European debt.
Analysts at Nomura Securities expect the ECB to cut its benchmark interest rate by a quarter percentage point to 0.5% and provide further details on the bond-buying program.
“If the ECB does something bold at this week’s meeting, it could have the power to further reduce credit risk overseas and eventually end the bond rally in U.S. Treasurys [and German] bunds,” said George Goncalves, a bond strategist at Nomura.
Analysts will also look to U.S. data this week — capped on Friday with the employment report for August — to gauge whether Federal Reserve officials may be more or less inclined to ease policy.
On Friday, bond yields fell after Fed Chairman Ben Bernanke called stagnation in the U.S. labor market a “grave concern” and said he was open to using more quantitative easing as needed to help the economy. Read about Treasury bonds, Bernanke.
“Conversely, if the ECB does not come out with a program that markets believe will work, the Fed might have to implement QE3 regardless to offset the damage that might ensue to risk markets,” which would boost U.S. bonds, Gonclaves said. “That said, it doesn’t mean we envision a major selloff either, as a lot can still go wrong.”
Deborah Levine is a MarketWatch reporter, based in New York.
