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TREASURIES-U.S. bond prices inch down on ECB speculation
August 21, 2012 / 9:58 AM / 5 years ago

TREASURIES-U.S. bond prices inch down on ECB speculation

LONDON, Aug 21 (Reuters) - U.S. bond prices edged lower on Tuesday as investors preferred riskier assets due to expectations that the European Central Bank will intervene eventually to ease the euro zone debt crisis, but lack of detail about its plans limited losses.

* Traders cited a story in British newspaper The Daily Telegraph which said it could confirm earlier reports in German media that ECB experts were examining plans to effectively cap Spanish and Italian bond yields.

* The ECB tried to quash speculation on Monday that it would target specific interest rate thresholds as part of any bond-buying programme. On Tuesday, it reiterated the statement.

* Uncertainty about the ECB plans is high. Investors are also concerned that the ECB’s condition that troubled countries need to ask for help from the euro zone’s rescue funds before getting assistance from the central bank may mean that the Spanish crisis could get worse before it gets better.

* U.S. 10-year T-note yields were last 1 basis point higher at 1.82 percent, while T-note futures were 3/64 lower at 132-15/32.

* “We are a bit weaker today due to all the speculation in the press,” one trader said. “But it’s the usual story. We still need Spain to formally request aid ... so we’re back to chicken and egg. Which comes first? Spain are 150 basis points lower in yield than a couple of weeks ago so they’re probably thinking ‘why do we need to do this now?'”

* Losses were also limited by technical factors, with the 200-day moving average at 1.87 percent capping this month’s rising trend in 10-year yields on the back of improved U.S. economic data.

* “I recognise that U.S. data has been good, but we are up here on hope and expectation that the ECB is going to announce a big plan on Sept. 6 (at its meeting)... and I think there’s room for Europe to disappoint” the trader said.

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