Treasury to sell $78 billion in notes and bonds

The US Treasury will sell $78 billion in notes and bonds in the coming week and the reception for those sales depends on whether investors' renewed regard for safety will justify the price of those securities which has been driven higher by rising alarm about sovereign risk.
Traders have speculated that the European Central Bank may act to support other indebted eurozone countries and banks, easing fears that Greece's debt woes may spread. If the weekend produces policy actions convincing enough to reassure markets, safe-haven assets could see profit taking.
That would also allow markets to focus more on Friday's encouraging US employment report, data that showed private sector job growth in April, including in cyclical sectors of the economy like manufacturing and construction, and upward revisions to job growth in February and March.
In that scenario, the Treasury auctions "will not come easy," said Thomas di Galoma, head of fixed-income rates trading at Guggenheim Securities in New York.
Investors' reduced appetite for risk could give US Treasuries a bid, but demand for securities offering such low yields might be less than voracious, he said.
"The curve will need to steepen going into this new supply," he said, so that investors will be compensated for buying longer-term 10- and 30-year securities.
The three Treasury auctions could offer bidders a tough choice between desired safety on one hand and the penalty of low yields on the other, said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ.
Rupkey said after Thursday's enormous selloff of 1000 points intra-day, the stock market is still unsettled. Rupkey said the red flag for the Treasury market was Friday's jobs report.
The private sector job growth reflected in the US Labour Department data "could have pushed 10-year Treasury yields above 4 percent if not for this European crisis," Rupkey said. Rupkey said yields could go higher in the coming week.