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TREASURIES-Bonds dip on mild profit-taking
June 5, 2012 / 1:46 PM / 5 years ago

TREASURIES-Bonds dip on mild profit-taking

 * U.S. yields rise from historic lows
 * Profit-taking in 'deeply overbought' market cited
 * Uncertainty about Europe, Fed policy limits losses

 (adds comments, context, updates prices)	
 By Ellen Freilich	
 NEW YORK, June 5 (Reuters) - U.S. Treasuries prices slipped
o n T uesday as traders took profits after a recent rally that
last week pushed yields to historic lows.	
 The 30-year bond led the way lower, falling as
much as a point before trimming its loss to half a point. Its
yield rose to 2.60 percent from 2.57 percent on Monday.	
 "This is nothing more than a continued technical backup in
rates," said Ian Lyngen, senior bond strategist at CRT Capital
Group in Stamford, Connecticut.	
 "We've had deep, overbought market conditions for some weeks
now and, of course, after last week's post-payrolls plunge in
yields, we are even more overbought now," said William
O'Donnell, managing director and head of U.S. Treasury strategy
at RBS Securities in Stamford, Connecticut.	
 O'Donnell cited some fundamental factors that could argue
for higher Treasury yields.	
 "Stocks are beginning to stabilize. There's growing evidence
the U.S. housing market has stabilized so it's no longer likely
to be a drag on growth or household wealth," he said.	
 But mainly, "People are getting bond market vertigo with
10-year yields at 1.5 percent," O'Donnell said. "There's not
much meat on the bone no matter how worried you are about
Europe.	
 "Even some of our most stridently bullish accounts have been
selling in the last few days during this latest push lower in
rates," he said. "We saw pretty decent selling out of Asia in 5s
through 10s yesterday and more again last night."	
 But investors seemed less than eager to abandon safe-haven
U.S. government debt. S&P stocks indexes opened lower and talks
among the Group of Seven industrialized nations concluded
without a statement. Even with yields barely above historic
lows, losses across most of the yield curve were mild.	
 Benchmark 10-year notes were down 4/32 in price,
their yields rising to 1.55 percent from 1.52 percent on Monday.
Benchmark 10-year Treasury yields on Fr iday touched an all-time
low of 1.44 percent.	
 "Our widespread anecdotes suggest legions of buyers will
emerge on a drop in bond prices and blip up in rates so it's my
best guess 10-year Treasuries will chop sideways in a 1.50
percent to 1.70 percent range because we still have a lot of
events to clear," O'Donnell said.	
 Investors are focused on the Greek elections June 17 and a
Federal Reserve policy meeting on June 20. And Federal Reserve
Chairman Ben Bernanke testifies before Congress on Thursday.	
 "Bernanke on Thursday is potentially huge," O'Donnell said.	
 Investors will be tuning in to the Congressional testimony
to hear the Fed Chairman's views on the intensity of downside
risks to U.S. economic growth and to get a feel for whether the
Fed might make monetary policy more accommodative in an effort
to spur economic growth.	
 Spain also tests the market on Thursday with an issue of up
to 2 billion euros ($2.5 billion) in medium- and long-term bonds
at auction. The country's Treasury minister Cristobal Montoro
said on Tuesday that Spain's high borrowing costs mean it is
effectively shut out of the bond market and that the European
Union should help Madrid recapitalize its debt-laden banks.	
 "It's an event a day so that will keep 10-year Treasury
yields contained," O'Donnell said. "We're nervously chopping
sideways. At the moment, we have some better selling."	
	
 (Editing by Theodore d'Afflisio)	
 	
 

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