MW: Treasurys edge down; eyes on Italy, U.S. Congress
U.S. Congress in spotlight as super-committee deadline approaches
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices slipped modestly Monday, pushing yields up but paring most of the declines during the European session as U.S. stock futures fell amid more caution about the outlook for Italy’s new government.
Yields on 10-year notes 10_YEAR +1.26% , which move inversely to prices, rose 3 basis points to 2.09%, after trading near 2.12% in overseas action. A basis point is 1/100 percentage point.
Yields on 30-year bonds 30_YEAR +1.16% added 3 basis points to 3.16%.
Two-year-note yields 2_YEAR -1.68% were little changed at 0.23%.
Bond markets were closed Friday for Veterans Day.
Over the weekend, Italian Prime Minister Silvio Berlusconi resigned and Mario Monti, a former member of the European Commission, was tapped to form a new government and implement austerity measures. Read about Italy’s Mario Monti.
Investors signaled some approval of Monti in bidding for Italy’s 5-year bond auction. Read about Italy’s bond auction .
Analysts also noted that attention is likely to turn back to the U.S. Congress and the so-called super-committee’s ability to come up with a package of deficit-cutting measures by next week.
`Grand deal’ elusive
“The chatter now suggests that a grand deal may be more difficult to achieve than initially envisioned,” said David Ader, head of government bond strategy at CRT Capital Group.
“The market is stuck between risk of Europe, generally bullish, and Congress, which we think will disappoint, thus making the sideways grind all the more compelling.”
The super-committee is facing a Nov. 23 deadline to make recommendations to save at least $1.2 trillion from the budget over 10 years. Automatic cuts begin in 2013 if the panel can’t reach agreement.
If those automatic cuts are the only outcome, long-term yields will rise “as it demonstrates lack of political will and, perhaps more critically, a Congress that’s oblivious to the consequences of itself,” Ader wrote in a note.
Last week, bonds were pushed back and forth as news out of Europe alternated between good and bad, pushing investors toward and then away from the relative safety of U.S. bonds. They ended the week with small losses. Read about Treasury market last week.
