By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices fell on Wednesday, after a ruling from a German court on the country's contribution to the euro zone’s bailout fund boosted investors’ willingness to shift further out of relative safe havens like U.S. bonds and German bunds.
Yields on U.S. 10-year notes 10_YEAR +2.52% , which move inversely to prices, rose 4 basis points to 1.75%.
A basis point is one one-hundredth of a percentage point.
Thirty-year bond yields 30_YEAR +1.86% added 5 basis points to 2.91%. Yields on 5-year notes 5_YEAR +2.84% increased 2 basis points to 0.69%.
Germany’s constitutional court rejected calls to block ratification of the euro-zone permanent rescue fund, clearing the way for implementation of an important tool in Europe’s effort to contain its three-year-old debt crisis. See story on Germany’s court ruling.
“Risk remains very much back on the table,” said Andrew Wilkinson, chief economic strategist at Miller Tabak. The decision “allows German lawmakers to ratify its use of the €500 billion fund to backstop euro-zone partners in need of a prop as austerity measures repress growth.”
Having the European Stability Mechanism with enough cash was key to the European Central Bank program, announced last week, of buying distressed sovereign debt if a country asks for a bailout.
ECB President Mario “Draghi’s bond-buying plan is now the dominant force should Mediterranean nations call upon Brussels for help,” Wilkinson said.
As for the other big safe-haven bond market, yields on 10-year German bunds DE:10YR_GER +5.36% rose 8 basis points to 1.63%.
On the opposite side, investors became emboldened to buy the debt of debt-laden countries themselves by the further confidence that both political leaders and the ECB have shown more willingness to keep them in the euro zone.
Later in the session, the Treasury Department will auction $21 billion in the benchmark securities. Demand for that sale will be driven by investors’ expectations for what additional easing measures the U.S. Federal Reserve takes at the end of its two-day meeting, which begins Wednesday. Read more on bond auction, Fed.
Deborah Levine is a MarketWatch reporter, based in San Francisco.
