Scepticism over Spanish bank bailout grows
NEW YORK US GOVERNMENT debt prices were little changed on Monday, as skepticism surfaced about whether a 100 billion euro bailout for Spanish banks announced over the weekend was enough to contain the region’s debt crisis.
Treasuries fell in earlier Asian trading as traders sold bonds and jumped back into growth-oriented assets like stocks on the expected move to recapitalize Spanish banks.
However, bonds recouped their initial losses during European trading.
“The sugar buzz has worn off,” John Brady, senior vice president of interest rates futures sales at RJO’Brien and Associates in Chicago, said of the Spanish bank rescue deal.
There is also the issue of Greece’s membership in the eurozone bloc ahead of its national election this Sunday, he and other analysts said.
Benchmark 10-year Treasury notes were last up 1/32 in price, yielding 1.63 percent, down 0.4 basis point from late on Friday. The 30-year bond was last up 3/32 to yield 2.74 percent, down 0.5 basis point from Friday’s close.
Tempering bonds’ recovery was the $66 billion worth of couponbearing supply for sale starting on Tuesday.
Despite their meager yields, analysts anticipate the US Treasury should easily sell the new issues.
“There is a shortage of high-quality collateral. The auctions will go fine,” Brady said.
Meanwhile, four Fed officials will make public appearances in the wake of Fed Chairman Ben Bernanke’s testimony on the US economy last week.
Bernanke said the US central bank is prepared to provide more stimulus if the economy falters, but gave no specifics whether it will embark on a third round of bond purchases, dubbed QE3, will happen soon.