Treasuries decline

US Treasuries prices fell on Wednesday as investors, encouraged by improving manufacturing data and hopes of an orderly debt restructuring by Greece, snapped up riskier assets such as stocks and corporate bonds. Taking advantage of the improved appetite for risk, companies flooded the market with $16.5 billion in new bonds, the heaviest issuance of corporate investment-grade debt since October 27, reported IFR, a Thomson Reuters' unit.
The sell-off in US government bonds followed a month-end rally that had driven benchmark 10-year yields to their lowest level since early October. Much of the price action was likely related to technical factors, however, and traders still expect Treasuries yields to decline in the longer run. "There have been fits and starts of concentrated buying in the Treasury market," said Dan Mulholland, a Treasuries trader at RBC Capital Markets in New York.
"The pattern of late is that assets are rallying together, we see stocks and bonds moving up together. I think that's a reflection of the expansion of global balance sheets and easy monetary policy for the next three years," he said. Benchmark 10-year Treasury notes fell 12/32 point in price to yield 1.83 percent, up from a near four-month low of 1.79 percent hit on Tuesday. Thirty-year Treasury bonds were down 1-10/32 to yield 3.0 percent, up from 2.94 percent the previous day.
Two-year interest rate swap spreads, which are seen as a proxy for credit counterparty risk, tightened 2.25 basis points to 27.50 basis points. They have tightened from above 50 basis points in December. Hopes that Greece and its private creditors will agree to an orderly restructuring of its debt in the next few days supported market sentiment, driving down the borrowing costs of debt-ridden euro zone countries such as Portugal and Italy.
Portuguese 10-year yields fell to around 15.5 percent after reaching a record high of about 17.4 percent on Tuesday. Behind Wednesday's bout of risk appetite were also reports showing that factory activity accelerated in China, the United States and Germany in January. In the United States, the manufacturing sector grew at its fastest pace in seven months, according to an index from the Institute for Supply Management.