Treasuries climb

US Treasuries prices climbed on Tuesday as global growth concerns and fears Greece may not secure enough creditor support to avoid a disorderly debt default drove investors into the perceived safety of bonds. Investors fled stocks as emerging-market powerhouse Brazil announced a disappointing economic performance for 2011, only one day after China cut its growth forecast for this year.
In Europe, the latest economic data suggested the economy is unlikely to escape recession. Aversion to risk also grew on mounting concerns about the level of private investor participation in Greece's debt swap, which is essential for the nearly bankrupt country to receive a second round of bailout funds.
Failure to complete the exchange by a Thursday deadline could trigger a messy default that the main group of Greece's bondholders has said would cause over a trillion euros ($1.3 trillion) of damage to the eurozone. "Global financial systemic risk is at the forefront right now. The question is whether there will be a successful tender come Thursday of enough private bondholders to avoid the spectre of default with a capital D," said David Dietze, investment strategist at Point View Wealth Management, Inc in Summit, New Jersey.
Key Wall Street indexes fell more than 1.5 percent while demand for lower-risk assets such as Treasuries grew. Benchmark 10-year Treasury notes traded 20/32 higher in price to yield 1.95 percent, down from 2.02 percent late Monday. Thirty-year bonds rose 1-15/32 in price to yield 3.09 percent, down from 3.16 percent late Monday.
"You're seeing a lot of the inverse movement with the stock market" today, said Bill Dixon, senior commodities broker at RJO Futures in Chicago, who specialises in Treasury and metals markets. "Also we do have a lot of big numbers coming out later on this week. A lot of people might have wanted to go ahead and take whatever profits that they had in stocks as soon as they saw some weakness," he added.
The week's most closely watched US release will be February nonfarm payrolls on Friday. The median of forecasts from economists polled by Reuters is for US employers to have added 210,000 jobs, down from 243,000 in January. Despite Tuesday's performance, stocks have been rolling higher so far this year while Treasury prices have also held up well. Benchmark note yields remain mired in a 1.79 percent to 2.17 percent range that has held since early November.
Much of that resilience in Treasuries prices comes from the Federal Reserve's pledge to hold interest rates near zero at least through late 2014, along with buying of longer-dated bonds under the central bank's latest stimulus programme, dubbed "Operation Twist."
The Fed on Tuesday bought $4.027 billion of Treasuries maturing May 2018 through November 2019 as part of Operation Twist. It will again buy longer-dated Treasuries on Wednesday and Thursday, and is scheduled to sell shorter-dated securities on Friday. Rick Klingman, managing director of Treasury trading at BNP Paribas in New York, said Treasuries were supported by the Fed buying and by some hedging in a recent round of corporate debt issuance. "We haven't seen the whole calendar yet, but if there are more financials that tends to be better for the Treasury market because financials tend to swap their issuance - when they price, they bring about buying in Treasuries," he said.