Treasuries outlook: prices near flat as investors on edge over Cyprus

Prices for US Treasuries traded near flat on Friday as a bailout for Cyprus remained in doubt headed into the weekend, leaving investors nervous about the country's future in the euro zone. Cyprus was just hours away from a deal on Friday to raise billions of euros and unlock a bailout from the European Union that could avert financial meltdown and exit from the euro, its ruling party said.
The remarks came after Moscow rebuffed requests from Nicosia for assistance, days after a proposal for a tax on Cypriot bank accounts roiled global markets. "It's an extremely low-volume day," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut. "The reality is there's not a lot of stuff that's germane or relevant to Treasuries or Treasuries alone... We're just kind of here and waiting."
Ten-year notes last traded down 2/32 in price to yield 1.920 percent. The notes have traded at yields of between 1.90 and 1.97 percent this week after falling from around 2.06 percent last week. The 30-year bond also traded down 2/32 in price to yield 3.137 percent.
Fears that Cyprus' problems could be replicated in other euro zone countries including Spain and Italy pushed Treasuries yields down this week, despite improving US economic data that had led some market participants to position for higher yields. Traders are questioning whether further volatility in the euro zone will push benchmark Treasuries again below the 1.90 percent level or if a solution to Cyprus' problems will bring attention back to the US economy and send yields back above 2 percent.
"Overall, guys aren't really quite sure which way the market is going to break," said Sean Murphy, a Treasuries trader at Societe Generale in New York. "There is a good pull for higher rates, and there is a stubborn crowd saying it's the same old story and we're in a low-rate environment for a while. It's choppy enough that you're not getting enough on the data front to really convince you to break out one way or another," he said.
Investors are scrutinising data for signs of an improving employment picture, which is seen as key for the Fed to end its ongoing bond purchase program. The Fed bought $3.68 billion in debt due 2018 and 2020 on Friday as part of this effort. Most economists expect the Fed to end or taper purchases at the end of the year.