By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose Monday, pushing yields down, as investors shifted away from riskier assets including the euro and equities after the Group of 20 nations refused to boost funding for International Monetary Fund until the euro zone does more on its own.
Yields on 10-year notes 10_YEAR -2.17% , which move inversely to prices, fell 5 basis points to 1.93%. A basis point is one-hundredth of a percentage point.
Thirty-year yields 30_YEAR -1.16% slipped 5 basis points to 3.06%.
Yields on 5-year notes 5_YEAR -4.46% declined 5 basis points to 0.85%.
A weekend meeting of finance ministers from the Group of 20 nations saw no agreement on boosting the IMF’s lending resources. Officials indicated they won’t move until European leaders take action to boost the size of the rescue funds that aim to provide a firewall against the spread of the euro-zone debt crisis. Read more on G-20.
“Yields have drifted lower as global equities have given back some of the recent bid on limited progress from the G-20 summit this weekend,” said Ian Lyngen, senior government bond strategist at CRT Capital Group.
The only U.S. data for the day is a report on pending home sales at 10 a.m. Eastern time.
Treasury prices rose last week, though remained in a tight range, as worries about Europe continued despite gains in equities. Oil prices also returned as a key risk for consumer spending. Read about bonds on Friday.
Beyond the G-20 meeting, traders this week will key in on how much banks borrow during the European Central Bank’s long-term refinancing operation, or LTRO.
Fed still Twisting yields
Weakening Treasurys’ traditional correlation to stocks is the Federal Reserve's continued purchases of long-term debt and sales of short-term holdings under “Operation Twist.”
The Fed has three purchases scheduled for this week, rounding out its $45 billion in debt it expected to buy this month, in what are called permanent open market operations. It’s also sold about $43 billion in February. See Fed’s Operation Twist schedule.
The Fed has conducted roughly the same amount of purchases and sales every month since October.
“In a period of low volume, the U.S. rates market is being pinned down by the Fed POMO activity and let’s not forget U.S. Treasurys also serve as a hedge to Europe in case the LTRO euphoria fades,” said bond strategists at Nomura Securities.
“This backdrop is breaking long-standing correlations where in the past, risk market out-performance meant that yields would need to rise to attract buyers, but now they don’t because of Fed buying.”
