March 1, 2012 / 8:57 PM / 5 years ago

TREASURIES-U.S. bonds down as QE3 timing reassessed

 * Riskier assets improve at expense of safe-haven U.S. debt
 * Timing of QE3 reassessed after Bernanke testimony
 * Decision that Greek deal didn't trigger CDS payout weighs

 (Adds trader's comment, updates prices)	
 By Chris Reese	
 NEW YORK, March 1 (Reuters) - U.S. Treasury debt
prices fell on Thursday as a pushback in expectations on when
the Federal Reserve might launch another round of monetary
easing continued to weigh on the market and riskier assets drew
money away from safe-haven debt.	
 Testimony by Federal Reserve Chairman Ben Bernanke on
Wednesday had initially sparked selling when his remarks failed
to hint at a new round of quantitative easing, or QE3.	
 And Bernanke's question and answer session with the Senate
Banking Committee on Thursday did not change that impression.	
 "There's a reassessment of where the Fed is going, and some 
long positions are getting liquidated," said Kevin Flanagan,
executive director and fixed-income strategist at Morgan
Stanley. "The market felt heavy in an environment of
non-imminent QE3. That doesn't mean they're not going to give
you QE3, but the market had priced it in as coming sooner,
rather than later."	
 Stocks rose as investors focused on positive jobs numbers
among a mixed bag of data. 	
 The government said U.S. jobless claims edged lower in the
latest week, holding near four-year lows, suggesting the labor
market was gaining momentum. On the other hand, the Institute
for Supply Management said its index showed the pace of
manufacturing growth slowed in February. 	
 A decision by the International Swaps and Derivatives
Association that Greece's recent moves to prepare for a debt
restructuring had not triggered a payout on credit default swaps
also damped demand for Treasuries. 	
 "If you're not going to have a CDS event provoked, there's
less need for safe-haven debt so you might as well sell some
Treasuries," said Cary Leahey, managing director and senior
economist at Decision Economics in New York.	
 The ruling from ISDA also contributed to the generally
better environment for peripheral European debt while the
traditional safe havens, U.S. Treasuries and German bunds, sold
off, said Eric Stein, vice president and portfolio manager at
Eaton Vance Investment Managers in Boston.	
 Benchmark 10-year notes traded 17/32 lower in
price, and their yields rose to 2.03 percent from 1.97 percent
late on Wednesday. The notes were on track for the biggest
two-day rise in yields since Feb. 2-3.	
 "There was a large liquidation post the Bernanke speech when
no additional comments on quantitative easing were included in
that speech. Dealers and investors are net long and what we saw
was a significant amount of profit taking," said Scott Graham,
head of government bond trading at BMO Capital Markets in
Chicago.	
 The 30-year bond fell 1-6/32 to yield 3.15
percent from 3.09 percent late Wednesday.	
 Still, Treasuries have not broken out of a range in place
since early November, analysts noted.	
 "Many people are taking profits because you had a move from
a little over 2 percent down to 1.9 percent," Leahey said of the
yield on 10-year. "There's been no significant change in the
range so in terms of the technical behavior of the market, this
move is not a game-changer."	
 	
	
 (Additional reporting by Ellen Freilich; Editing by Leslie
Adler)	
 	
 

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