LONDON, Sept 18 U.S. Treasury prices rose on
Monday as a recent sharp sell-off lured investors back into the
cheapened market but yields were seen creeping higher towards
* U.S. 10-year yields fell 3 basis points to
1.82 percent, while 30-year yields were little
changed at 3.03 percent.
* "We had seen a huge rally in risk markets up to the end of
last week. We seem to have taken a bit of a pause for breath now
as the market assesses the impact of ECB and Fed measures," RIA
Capital Markets bond strategist Nick Stamenkovic said.
* The Federal Reserve launched another aggressive stimulus
programme last week, while the European Central Bank earlier
this month said it would buy unlimited amounts of bonds of
struggling euro zone sovereigns, if countries asked the euro
zone rescue fund for financial help first.
* Despite the rebound in bond prices, Stamenkovic still
expected 10-year yields to end the year at around 2 percent.
* "But I wouldn't be recommending, at the current level of
yields, adding significant short (selling) positions. I would
wait for a bit of a pull-back i.e. yields to fall down further,
maybe to the 1.70 level or below, before implementing shorts
again," he added.
* The U.S. central bank's decision to tie its controversial
bond buying directly to economic conditions was an unprecedented
step that marked a big escalation in its efforts to drive U.S.
* The Fed's emphasis on employment and its pledge to pursue
an easy monetary policy "for a considerable time" even after the
economy strengthened suggested it was willing to tolerate some
possible inflation in the name of employment and growth, market
* Treasury yields would thus have to rise further in order
to adjust for that possibility, one trader said: "The market
needs to reprice in inflation expectations and inflation
expectations don't exist at 1.83 or 1.80 10-year yield."
* To prepare for that risk, 10-year yields would have to
rise to 2.50 percent, he said. "It's pretty aggressive but I
think that's a three-to-six month process," the trader added.