By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose Monday, pushing yields down, as traders positioned ahead of Federal Reserve Chairman Ben Bernanke’s inaugural news conference following the central bank’s interest-rate decision.
“Bernanke’s post-decision press conference adds enough uncertainty to the process of communicating the FOMC’s message that it’s a clear risk event,” said strategists at CRT Capital Group.
Bernanke will hold the news conference Wednesday after the Fed rate decision. Read more about economists’ questions for Bernanke.
Yields on 10-year notes UST10Y -0.88% , which move inversely to prices, fell 3 basis points to 3.37%. A basis point is 1/100th of a percent.
Thirty-year bond yields UST30Y -0.38% slipped 1 basis point to 4.46%.
Trading during Asian and European market hours was light, with major markets still closed for the holidays. CRT Capital Group analysts said even by late U.S. morning, Treasury-bond volume was 39% of the 10-day average.
Analysts at RBS Securities noted that the benchmark 10-year note’s yield sits near the middle of a well-established range between 3.25% and 3.55%, which have provided good technical support and resistance
“A break and close in 10-year yields outside of this range will probably signal the beginnings of a new trend for yields,” said RBS strategists Bill O’Donnell and John Briggs in a note. “Our hunch is that the greater risk lies to lower yields, but we’ll wait for the Fed and the price action to crystallize (or refute) that view.”
Bonds took little direction from a report showing sales of new homes rose 11.1% in March, less than some economists forecast. See story on new-home sales.
Also, the Fed bought $7.24 billion in Treasury debt maturing from 2016 to 2018, as part of a program that is the centerpiece of the Fed’s loose monetary policy. See Fed buyback results.
The buybacks, a policy known as quantitative easing, were the Fed‘s attempt to keep money flowing through the financial system and to prevent too much of an increase in interest rates, which could slow the economy’s recovery.
Besides a $600 billion purchase program announced in November, the Fed has since August been reinvesting cash from maturing mortgage-related holdings back into Treasurys, which have accounted for about $17 billion to $32 billion the monthly purchases since August.
Under both programs, the Fed has purchased $614 billion in notes and bonds through last week, according to Morgan Stanley.
Also limiting gains, traders are positioning for $99 billion in U.S. debt sold this week. The Treasury Department will sell $35 billion in 2-year notes on Tuesday, followed by a sale of $35 billion in 5-year notes the next day. A sale of $29 billion in 7-year notes will be held Thursday.
Last week, Treasury yields fell slightly, pushing prices up for a second week. Read about Treasury bonds last week.
