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TREASURIES-U.S. bonds fall as safety bid ebbs
March 1, 2012 / 2:51 PM / 6 years ago

TREASURIES-U.S. bonds fall as safety bid ebbs

 * ISDA Greece decision weighs on safe-haven bid
 * Narrowed peripheral debt spreads crimps safety bid
 * Lack of QE3 specifics from Bernanke disappointed market
 * Stock market gains curbs safety bid for U.S. debt

 (Adds comment, updates prices)	
 By Ellen Freilich	
 NEW YORK, March 1 (Reuters) - U.S. Treasury debt
prices fell on Thursday as several factors conspired to depress
investors' appetite for safe-haven U.S. government debt and keep
the bond market on the defensive.	
 The government said U.S. jobless claims edged lower week,
holding near four-year lows, news that suggested the labor
market was gaining momentum.	
 Shortly before that news was released, the International
Swaps and Derivatives Association said Greece's recent moves to
prepare for a debt restructuring had not triggered a payout on
credit default swaps.	
 The ISDA committee had been asked to consider whether a
"credit event" had occurred as a result of new Greek legislation
that could force all bondholders to accept losses and after the
European Central Bank took steps to avoid losses on its Greek
bonds. [ID: nL5E8E14IC]	
 "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.	
 Benchmark 10-year notes were down 21/32, their 
yields rising to 2.05 percent from 1.97 percent late on
Wednesday. The 30-year bond was down 1-13/32, its 
yield rising to 3.16 percent from 3.09 percent on Wednesday.	
 "The ruling from ISDA provided a bid to peripheral European
debt while the 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.	
 "There's been a significant improvement in some of the
peripheral European debt markets," said John Canavan, market
analyst at Stone & McCarthy Research Associates. "Italian and
Spanish spreads, in particular, have narrowed." 	
 Yields on French bonds also fell at an auction on Thursday
suggesting cash from the European Central Bank's flood of cheap
3-year loans was boosting appetite for longer-term debt. 	
 The French sale, following a 4.5 billion euro placement of
shorter-term paper by Spain, came a day after the ECB injected
530 billion euros in funds into banks in the second of two
operations that have eased concerns over Europe's debt crisis. 	
 Those easing concerns are disadvantageous for safe-haven
U.S. Treasuries. 	
 Another riskier asset class, stocks, opened higher on Wall
Street. That weighed on safe-haven Treasuries, also, he said.	
 Besides "solid" auctions of Spanish and French debt after
Wednesday's long-term refinancing operation (LTRO), China's
purchasing managers' manufacturing index hit a five-month high,
said William O'Donnell, head of U.S. rate strategy at RBS in
Stamford, Connecticut. 	
 China's factories grew more than expected in February as new
export orders for big firms bounced back, a government survey
 That followed a solid reading on manufacturing in the U.S.
Midwest reported on Wednesday, underscoring upbeat expectations
for the nationwide Institute for Supply Manufacturing
manufacturing index due at 10 a.m. ET (1500 GMT) on Thursday. 	
 Encouraging the inclination to take profits was the "no real
mention of QE3" from Federal Reserve Chairman Ben Bernanke in
Congressional testimony he delivered Wednesday, O'Donnell said,
referring to another potential stage of monetary easing.	
 "A segment of the market was saying QE3 was almost definite
in the second quarter and Bernanke gave no hint of that," Leahey
said. "He didn't even add higher oil prices to the list of risks
the Fed is worried about. So a bunch of guys took profits and
that has continued through this morning."	
 Still, Treasuries have not broken out of a range in place
since early November, he noted.	
 "Many people are taking profits because you had a move from
a little over 2 percent (in the 10-year yield) down to 1.9
percent," Leahey said. "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."  	

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