US Treasury debt easy

US Treasury debt prices eased on Tuesday after billionaire investor Warren Buffett offered to take over some liabilities of bond insurers, easing some concerns that have inspired flight-to-safety bond buying. Price losses were tempered in the afternoon however as stocks trimmed earlier hefty gains.
US stocks surged early in the day and bonds fell after Buffett told CNBC television that Berkshire Hathaway's plan would cover $800 billion in municipal bonds. His remarks eased fears that credit downgrades at the insurers could force selling of billions of dollars of municipal debt, and curbed the risk aversion bid that has stoked a US government bond market rally for much of the past seven months.
Benchmark 10-year notes traded 11/32 lower in price for a yield of 3.67 percent from 3.62 percent late on Monday. Benchmark yields, which move inversely to prices, reached to as high as 3.73 percent on Tuesday at the height of the stocks surge.
"The whole day has pretty much been centered on the rally in stocks after Warren Buffett made his offer to try to pick up some of municipal bond liabilities," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
Some of the shine came off of stocks late in the day however, with falling shares of Apple Inc and Research in Motion reining in the equities rally. The Dow Jones industrial average unofficially closed about 1.1 percent higher at 12,373 points.
US Treasuries are often seen as a comparatively stable refuge to park funds when stocks tumble, whereas climbing equities tend to draw flows out of Treasuries. "Bonds are catching a bid at the close as stocks are giving back most of the gains," said Andrew Brenner, analyst with MF Global Inc in New York. Two-year notes traded unchanged in price for a yield of 1.92 percent.
Analysts said the Buffett plan may ease fears of an intense credit market sell-off centered on municipal bonds. He told business news television channel CNBC he has offered the three top bond insurers to reinsure $800 billion in municipal bonds, and that while two had not yet responded, a third had rebuffed the offer.
Investors are looking ahead to retail sales data and remarks from Federal Reserve Chairman Ben Bernanke this week for further bond direction. These events could shed light on whether the US economy is in recession and what policy-makers' response in the next few months may be.
US January retail sales figures, to be released on Wednesday, will be closely watched because consumer spending accounts for around 70 percent of US economic output. Bernanke testifies to Congress on the economy on Thursday. Five-year Treasury notes 5/32 lower in price for a yield of 2.69 percent from 2.65 percent late on Monday, while 30-year bonds traded 31/32 lower for a yield of 4.46 percent from 4.40 percent.