U.S. auctioning 3-year notes during session
By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices rose on Tuesday, pushing yields down, as more worldwide reports of slowing growth – this time from the International Monetary Fund – and protests in Greece made traders more skittish about riskier assets.
The major event on Tuesday will be the Treasury Department’s sale of 3-year notes 3_YEAR -1.42% , the first of three big auctions this week. The auction ends at 1 p.m. Eastern time.
Yields on 10-year notes 10_YEAR -1.55% fell 2 basis points to 1.72%.
Yields move inversely to prices. A basis point is one one-hundredth of a percentage point.
Thirty-year-bond yields 30_YEAR -1.01% slipped 3 basis points to 2.95% and 5-year yields 5_YEAR -2.36% declined 1 basis point to 0.67%.
The IMF said in a report that the risk of a steeper slowdown in growth is now “alarmingly high.” Read bloomberg.com: IMF sees ‘alarmingly high’ risk of steeper slowdown..
“Treasurys were reasonably well bid overnight on an array of negative European headlines and a downgrade of the IMF’s global growth outlook,” said bond strategists at CRT Capital Group.
Merkel goes to Athens
German Chancellor Angela Merkel arrived in Athens for her first visit since the European debt crisis began. She was met by swarms of protesters who were angry about the austerity measures that Germany and other northern countries demanded to give Greece a bailout. Read latimes.com: Germany’s Merkel arrives in Greece.
The possibility of Greece detaching from the euro zone has again entered the conversation, though Merkel’s visit is seen by some as a sign that's still not what she or Germany wants.
Greece isn’t really important in financial terms: The economy is small and a lot of debt is now in the hands of official institutions after regular investors were forced to exchange their holdings.
But the continued struggle to take the steps seen as needed to balance its budget, and to keep getting tranches of that bailout, indicates to investors that any future bailouts of other countries could be similarly rocky.
Bond yields came off their lows along with U.S. stock futures.
Low yields
U.S. bond markets were closed Monday for Columbus Day, so some trading may be a reaction to the selloff Friday after the monthly U.S. payrolls report was taken by most as a positive sign for the economy. Read: Treasurys erase 2-week rally after jobs report.
Yields have been exceedingly low, touching their lowest ever in recent months, as lackluster economic data prompted the Federal Reserve to again expand its bond-purchase program to buy mortgage-backed debt.
Investors are worried about whether even slow growth can survive threats from Europe's sovereign debt crisis and a potential hit from expiring U.S. tax and spending measures at the end of the year.
“Rates will likely stay in lower rate ranges into 2013, given the widely known uncertainties up ahead” and less debt issuance, said Bill O’Donnell, a bond strategist at RBS Securities.
“Once past the next six months or so of uncertainty, rates and growth could rebound given that the U.S. economy (housing, bank and household balance sheets, energy industry renaissance) continues its repair,” he wrote in a note. “That’s a risk we can’t shake and that’s what makes us circumspect about buying long-end Treasurys at these rate levels.”
Deborah Levine is a MarketWatch reporter, based in San Francisco.
