U.S. News

TREASURIES-Bonds plunge as euro rescue hammers safe havens


By Burton Frierson NEW YORK, May 10 (Reuters) - U.S. Treasuries tumbled on Monday after a $1 trillion plan to halt the euro zone's burgeoning debt crisis relieved investors of the fear that sent them scurrying into safe-haven government bonds last week. The European Union agreed an emergency loan package that combined with the International Monetary Fund support could reach 750 billion euros to stop Greece's sovereign debt crisis from spreading to other fiscally troubled euro zone countries. Euro zone central banks began the initiative by buying government bonds under the plan in an effort to support fractured markets, boosting debt of fringe countries such as Greece -- a step they had resisted as late as last week. See details Safe havens such as German Bunds and U.S. Treasuries plunged on hopes that the rescue plan would succeed in restoring stability to global financial markets, especially hard-hit stocks. "It's a risk-on kind of trade today after last week's debacle," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco. "The sovereign debt markets that were safe-haven trades last week are getting pounded today as equities recover pretty significantly and the dollar is lower." The benchmark 10-year Treasury note tumbled more than a point in price and was last down 1-4/32, pushing its yield up to 3.57 percent from Friday's close of 3.44 percent. The yield is also well up from last week's five-month low of 3.27 percent. While apparently positive for most financial markets, the unwinding of the recent safe-haven gains hurts Treasuries just as the market was preparing to bid for $78 billion worth of U.S. government bonds being offered this week. Though not a record amount, it is still a lot of supply to digest during a period of rapid changes in sentiment, which could result in poor demand. "Implications for the auctions will be less demand as it seems everyone has already bought into the flight-to-quality trade over the last two weeks," said Tom di Galoma, head of fixed income rates trading at Guggenheim Partners in New York. The 30-year long bond fell nearly three points. It was last down 2-22/32, yielding 4.44 percent versus Friday's close of 4.28 percent. (Additional reporting by Richard Leong) (Editing by Theodore d'Afflisio) ((burton.frierson@thomsonreuters.com;+1 646-223-6292; Reuters Messaging: burton.frierson.reuters.com@reuters.net)) -------MARKET SNAPSHOT AT 9:34 a.m. (1334 GMT)------- June T-Bond 120-15/32(-1-17/32) June 10-Year note 118-24/32 (-30/32) Change vs Current Nyk yield Three-month bills 0.145 (+0.02) 0.147 Six-month bills 0.2325 (+0.03) 0.236 Two-year note 100-06/32 (-06/32) 0.908 Five-year note 100-30/32 (-20/32) 2.299 10-year note 100-14/32(-1-08/32) 3.571 30-year bond 103 (-2-30/32) 4.442 Keywords: MARKETS BONDS (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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