Bond Prices Rise on Fresh Credit Concerns
Treasury prices rose early Monday as U.S. stock futures signaled a lower open on a resurgence of credit concerns.
Over the past week, yields -- which move inversely to prices -- on benchmark securities have touched two-year lows as investors' worries about stocks and other riskier assets have lent a safe haven bid to highly rated U.S. government debt.
The benchmark 10-year note's price rose 5/32 for a yield of 4.16 percent, slightly up from last week's two-year low near 4.13 percent and versus 4.18 percent late Friday.
"We are still in the same old rut where risk aversion is driving the market," said Kim Rupert, managing director, global fixed income analysis with Action Economics in San Francisco.
U.S. stock futures fell on Monday after Goldman Sachs added Citigroup to its "sell" list, citing prospects for more credit losses at the U.S. bank. Earlier, reinsurer Swiss Re unveiled a 1.2 billion Swiss franc writedown from the crisis in the subprime mortgage market.
"Equities are a little bit under water and that is sustaining a pretty decent bid in bonds, even though prices are at one or two year highs," Rupert said.
The main focus of this holiday-shortened week, with U.S. markets closing on Thursday for the Thanksgiving holiday, is likely to be the minutes from the October Federal Reserve policy-setting meeting.
Signs of economic weakness and expectations the Federal Reserve will go on cutting interest rates contributed to drive yields down last week.
However, recent comments from several policy-makers have hinted the central bank does not yet see any need for further easing of its benchmark short-term lending rate from 4.5 percent.
Along with the October meeting minutes due Tuesday, the central bank will for the first time publish expanded economic forecasts, which will provide a clearer view of how board members view policy.
Early on Monday, the two-year note -- which responds closely to expectations for central bank interest rate moves -- traded unchanged in price for a yield of 3.33 percent , versus 3.34 percent late on Friday.
Amid a light economic data slate, housing market data scheduled for Monday afternoon might add a slight bid to bonds if it confirms the well-worn theme of a steadily deteriorating homes sector.
Analysts polled by Reuters predict a slight fall in the NAHB November housing market index, due at 1 pm New York time, to 17 in November from 18 in October.