US bonds prices flat

US Treasuries prices were little changed on Monday as news suggesting progress for Greece to strike a deal with its lenders was offset by expectations the Federal Reserve will signal its intention to keep interest rates near zero. The US bond market has been stuck in a tight trading range since the Federal Open Market Committee meeting in March, with benchmark yields bouncing in a 0.21 percentage point range.
"It feels directionless. No one is expecting the Fed to do anything," said Gene Tannuzzo, portfolio manager at Columbia Management in Minneapolis. Bond prices were weaker earlier Monday as traders reduced their safe-haven holdings in Treasuries and German Bunds on a drop in Greek debt yields following news that Greek Prime Minister Alexis Tsipras reorganized his team that has been negotiating with international lenders.
The reshuffle was seen a move by Athens to obtain fresh funds in exchange for domestic reforms before it runs out of cash in June. Bond prices had also fallen as investors made room for $26 billion of two-year notes, part of this week's $90 billion in fixed-rate Treasuries. The two-year notes due in April 2017 fetched a yield of 0.5400 percent, matching January's level, but data showed investor purchase of the issue declined from the levels in March.
The Treasury will sell $15 billion in two-year floating-rate notes and $35 billion in five-year notes on Tuesday and $29 billion in seven-year debt on Wednesday. The initial price decline in bonds faded as traders were reluctant to make big bets ahead of the two-day FOMC meeting that begins on Tuesday. Analysts expected no change in policy stance from the Fed as recent domestic data have been weaker than forecast and a strong dollar has crimped export activities.
Until the Fed signals it will raise rates, Greece's future in the euro zone will be a key driver of US yields. Greek 10-year yields fell over half a percentage point to 12.06 percent, which was not far from near 2-1/2-year peaks. Lower peripheral euro zone yields led to modest selling in low-risk US and German government debt. US benchmark 10-year Treasury notes were down 2/32 in price for a yield of 1.924 percent, up 0.7 basis point from Friday, while their German counterparts were down 5 basis points in price for a yield of 0.16 percent, up a tad from Friday.