Treasurys hold tight as attention shifts to Spain

AP News
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Posted: Jun 18, 2012 3:55 PM
Treasurys hold tight as attention shifts to Spain

Treasury yields were little changed Monday even after elections in Greece appeared to diminish the odds that the country will drop the euro soon.

The price of the 10-year Treasury note inched up 28 cents for every $100 invested. The yield slipped to 1.58 percent from 1.60 percent late Friday. Stronger demand for bonds pushes their yields down.

Parties that support the terms of Greece's bailout agreement won enough votes to form a coalition government on Sunday. But instead of finding relief in Greece's election results, traders shifted their attention to Spain.

Spanish government bond yields surged above 7 percent Monday, a sign that investors are increasingly concerned that the country will struggle to save its crippled banks. That kept demand high for U.S. Treasurys and other government bonds considered safe.

Analysts said the Treasury market is likely to stay in a holding pattern until the Federal Reserve meets on Wednesday. Many expect the Fed to extend a program in which it sells short-term bonds to buy long-term ones. Some think the Fed will launch a new round of bond buying aimed at lowering mortgage rates.

"There seems to be a consensus that the Fed has to do something," said Ira Jersey, U.S. interest rate strategist at Credit Suisse. "The question is what?"

Traders won't want to make any big bets until they have a better idea of the Fed's next move, Jersey said.

In other Treasury trading, the price of the 30-year bond rose 28 cents, while its yield fell to 2.67 percent from 2.69 percent Friday. The yield on the two-year note edged up to 0.29 percent from 0.28 percent.

The three-month T-bill paid a yield of 0.08 percent.