November 29, 2010 / 1:40 PM / in 9 years

TREASURIES-Bond prices rise as Ireland bailout disappoints

* Treasuries get bid as Irish bailout details disappoint

* Ireland, Portugal CDS spreads widen after plan

By Karen Brettell (Updates market action, adds new quotes, changes byline)

NEW YORK, Nov 29 (Reuters) - U.S. Treasuries prices rose on Monday in early New York trade as investors disappointed by some details of the EU’s planned rescue package for Ireland sought out safe-haven debt.

Benchmark 10-year Treasury notes US10YT=RR rose 9/32 in price to yield 2.84 percent.

The 30-year bond US30YT=RR increased 7/32 in price to yield 4.19 percent.

“The total ‘risk on’ trade is still not back, even though there was this announcement,” said Ira Jersey, interest rate strategist at Credit Suisse in New York.

“I think part of it was that the Irish, Spanish and Portuguese market didn’t react the way some people thought they would, with spreads going wider,” he said. “That kept a little bit of a bid in Treasuries.”

The EU on Sunday approved an 85 billion euro ($115 billion) rescue package for debt-stricken Ireland, the second euro country after Greece to receive emergency aid.

The package includes 35 billion euros to help restructure the shattered Irish banks. Ireland will contribute 17.5 billion euros of its own cash and pension reserves towards the bank rescue. For details, see [ID:nLDE6AR0M6]

Credit default swaps protecting Ireland’s debt rose by around 9 basis points in cost on Monday to 612 basis points, or $612,000 per year to insure $10 million in debt for five years, according to Markit Intraday.

Portugal’s CDS costs also rose by around 36 basis points to 537 basis points and Spain’s CDS costs increased by around 29 basis points to 351 basis points, Markit data show.

Some investors were disappointed by details of the plan, including the contribution that Ireland’s pension fund will make to the bailout.

“Countries that use long term committed assets to solve short term budgetary and liquidity problems quite rightly draw investor skepticism, and the fact that it is the Pension Fund that is being used to plug a hole is a red flag to the markets,” Credit Suisse analysts noted in a report sent earlier on Monday.

“In addition the announcement that senior bondholders may be required to participate in any losses from 2013 was also not received well,” they added.

U.S. stock index futures also fell on Monday as worries lingered about Europe’s ability to contain government fiscal problems from spreading. [ID:nN29193518]

Editing by Chizu Nomiyama

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