US Treasury prices fell on Monday as hopes that European leaders will commit more cash to bail out debt-laden nations revived some appetite for stocks and reduced demand for safe-haven US government debt. Benchmark 10-year yields rose to 1.90 percent, their highest level since the Federal Reserve last week said it would buy longer-dated debt and sell short-dated notes.
The Fed's "Operation Twist," worth $400 billion, is aimed at lowering mortgage rates and other long-term borrowing costs with the goal of stimulating a sluggish US economy. The yield on the 10-year Treasury note has risen from more-than-60-year lows of 1.674 percent on Friday as fears European leaders were losing control of their debt problems and a slowing global economy sent investors scrambling for liquid, low-risk assets.
Thirty-year bonds, which have gotten the largest bounce from the Fed's plan to purchase longer-dated debt, fell 1-30/32 points in price to yield 2.987 percent. The yield fell as low as 2.74 percent on Friday, the lowest since January 2009. Hopes for progress to reduce's Greece debt so it can avert a default and a plan to shore up European banks lifted Wall Street stocks. The Standard & Poor's 500 rose 2.3 percent.
Policymakers over the weekend discussed the possibility of beefing up the eurozone's EFSF bailout fund for debt-stricken states. They did not agree on any action. Investors remain concerned about the ability of European officials to contain the crisis and anticipate markets will remain volatile. Concern over the weakening US economy is also likely to continue to provide a bid for bonds. Treasuries yields also reflect renewed fears over deflation as the economy again looks vulnerable to slipping back into recession.
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