By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) — Treasurys slipped on Monday ahead of Federal Reserve Chairman Ben Bernanke’s semi-annual testimony to Congress beginning on Tuesday and the impending sequester.
Yields on the benchmark 10-year U.S. Treasury note 10_YEAR +1.78% rose 3 basis points to 2% in morning trade. Yields move inversely to prices and one basis point is one one-hundredth of a percentage point.
Most of the Treasury losses visible on Monday happened overnight in Asian and European trading, said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott.
“I think we have two offsetting forces this week. Number one is Ben Bernanke’s testimony in front of Congress and number two is the impending sequester on Friday,” said LeBas.
Bernanke’s testimony to Congress this week will shed light on the future of the Fed’s $85 billion monthly bond-buying program. Minutes from the Federal Open Market Committee’s January meeting, released last week, showed concern among Fed officials about the risks of the monthly purchases of Treasury and mortgage debt. Fed officials have said that they expect the program could slow or stop by the end of 2013 at the latest.
The so-called sequester represents up to $85 billion in automatic federal spending cuts that will automatically begin on Friday if Congress and the White House cannot reach an agreement. If allowed to go into effect, personnel cutbacks triggered by the sequester would cause delays at major U.S. airports and delay the deployment of an U.S. Navy aircraft carrier to the Persian Gulf. Obama, Republicans face Friday sequester deadline
The sequester is the “biggest question mark for trading across all markets,” LeBas said.
Yields on the 30-year Treasury bond 30_YEAR +1.24% rose 4 basis points to 3.19% and yields on the five-year note 5_YEAR +2.30% rose 2 basis points to 0.849%.
Investors also watched developments in Italy, which held a general election on Sunday and Monday. Exit polls indicated a center-left coalition led by Democratic Party leader Pier Luigi Bersani was on track to win the election, news reports said Monday.
That eased concerns that former Prime Minister Silvio Berlusconi may return to power. Berlusconi campaigned on an anti-austerity platform that could threaten the euro-zone deficit outlook. Gains by Berlusconi’s coalition in the last six weeks have been matched by a 50 basis-point surge in Italian bond yields. Berlusconi’s pressure cooker effect
Yields on the 10-year Italian bond BX:TMBMKIT-10Y -5.17% fell 2 basis points to 4.17% as Italian stocks rallied following the exit polls.
Saumya Vaishampayan is a MarketWatch reporter based in New York. You can find her on Twitter @saumvaish.
