US Treasury debt prices rose on Friday as lingering worries about Europe's debt crisis and concerns over soaring oil prices stoked safe-haven demand for bonds, giving longer-dated issues their best week in four weeks. Still Treasury yields are stuck in the middle of a range that has held since early November after the benchmark 10-year yield touched its highest in about a month this week in reaction to Greece finally receiving a 130-billion-euro bailout to avert a chaotic default.
---- Longer-dated issues post best week in four
The bond market sell-off quickly faded as the optimism over Greece's second rescue package was displaced by nagging doubts as to whether the aid is enough to ring-fence that nation's long-term financial problems and prevent them from spreading into a global crisis, analysts said. Greece on Friday formally launched a bond swap offer to private holders of its bonds, kicking off the largest-ever sovereign debt restructuring and a vital part of its bailout.
"At best, we have put Greece's problem on the back burner, but we have not heard the last of Greece's problem. I'm not sure if they could deliver all the tough austerity measures they have promised," said Nic Pifer, portfolio manager at Columbia Management in Minneapolis, which has $326 billion in assets. As investors continue to grapple with Europe's fiscal predicament, they have also cast a wary eye on the surge in energy costs stemming from anxious buying tied to tensions over Iran's suspected nuclear ambitions and cuts in supply.
Global oil prices topping $125 a barrel on Friday and average US gasoline prices rose to $3.65 a gallon in the latest week. Investors fear surging energy costs would slow business and consumer spending, threatening to tips the world back into recession. "There are more concerns about rising gasoline prices. If gas prices keep rising, that's going to hurt the economy and fuel talk of a double-dip (recession)," Jim Kochan, chief fixed income strategist at Wells Fargo Fund Management in Menomonee Falls, Wisconsin, which manages about $400 billion.
On unusually light volume, benchmark 10-year Treasuries finished up 4/32 in price to yield 1.98 percent, down from 2 percent late Thursday. They touched a 2.08 percent yield on Tuesday in reaction to the Greece bailout. Benchmark yields were down 3 basis points on the week, the first weekly decline in four weeks. They were still near the middle of a range of 1.79 to 2.17 percent that has held sway since November 1. The 30-year bond last traded up 21/32 in price, yielding 3.10 percent, down 3 basis points from Thursday and 4 basis points from a week ago.
Longer-dated Treasuries fared better than shorter-dated issues. The two-year note was unchanged with a yield of 0.309 percent, up 1 basis point from last Friday. With the Greece bailout in their rear-view mirror, traders will look to Federal Reserve Chairman Ben Bernanke's view on the US economy and whether the Fed would implement more measures in an effort to lower unemployment and to stimulate housing.
Bernanke will testify before separate Congressional panels on Wednesday and Thursday. Economists expect he will likely offer a cautiously optimistic view on the US economy that still needs the help of ultra-loose monetary policy. According to Friday's data, the struggling US consumer and housing sectors might finally be coming out of their funk. Consumer confidence, gauged by Thomson Reuters and the University of Michigan, improved to its strongest in a year in late February, while the government said the inventory of new homes fell to the lowest in six years in January.