US Treasuries prices edged up on Monday before debt sales later in the week that could underscore how much investors are willing to pay for safety amid global market uncertainty. Investors are waiting to see how much demand there will be for $72 billion of US government debt supply this week. But US debt prices ended off the day's highs, and prices for 30-year bonds dipped in and out of negative territory to trade barely changed.
Treasuries had risen earlier, reclaiming some ground lost last week. "I think Treasuries got a bit ahead of themselves" in the morning, said Suvrat Prakash, an interest rate strategist with BNP Paribas in New York.
"Overall, looking at the broader sense, I think people feel good about owning Treasuries. But ... some people would rather wait until the bond auction is out of the way on Thursday." The Treasury will auction $32 billion of two-year notes on Tuesday, $24 billion of 10-year notes on Wednesday and $16 billion of 30-year bonds on Thursday to meet its quarterly refunding needs.
The European debt crisis still hovers in the background, said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco. Spain and Italy's borrowing costs dipped on Monday but remained at levels considered unsustainable, with Spain's 10-year debt trading with a yield just below 7 percent. "There's still a lot of risk in the world," Rupert said.
Treasuries prices fell on Friday after a stronger-than-expected US jobs report and after European Central Bank chief Mario Draghi said the bank was working on steps to cut borrowing costs for Spain and Italy. US employers hired the most workers in five months in July, which analysts said should give the Fed time to consider its options to foster economic growth.
Last week's "back-up in rates, while sharp by recent standards, still left 10-year yields below 1.60 percent, so it is difficult to argue the tone shift reflected any broader change in demand for US Treasuries," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut. After what Jefferies & Co chief financial economist Ward McCarthy called a "volatility fest" last week, US 10-year Treasury notes on Monday were trading 3/32 higher in price to yield 1.560 percent, down from 1.57 percent late on Friday, which was just below a four-week peak. "Yields are at levels that have tended to attract buyers," McCarthy said. Yields still remain not far off a record low of 1.38 percent reached on July 25. Thirty-year bonds were trading up 1/32 in price to yield 2.648 percent, compared to 2.65 percent late Friday.
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