By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) -- Treasury prices fell slightly on
Monday, pushing yields up, following positive global manufacturing
data and a good reception to the beginning of Greece's debt
buyback.
But the focus remains on negotiations over U.S. tax and spending
measures, which haven't progressed much.
There's also economic data this week that could play a role in
the Federal Reserve's decision next week on continuing Treasury
purchases.
Yields on 10-year notes , which move inversely to prices, rose 3
basis points to 1.65%. A basis point is one one-hundredth of a
percentage point.
Yields on 30-year bonds added 4 basis points to 2.85%.
Five-year yields rose 2 basis points to 0.64%.
Treasury Secretary Timothy Geithner and House Speaker John
Boehner solidified their stances on the fiscal cliff on Sunday, but
Geithner predicted Republicans will in the end accept higher tax
rates and reach a budget deal.
"If the fiscal cliff is the market's focus for 90% of the
movement we'll get between now and year-end, then we don't have a
lot of expectations for the week ahead to do more than fixate and
shift with a given headline," said bond strategists at CRT Capital
Group.
Ten-year yields are likely to remain between 1.54% and 1.75%,
they said.
Also providing support for government bonds, analysts widely
expect the Federal Reserve to extend the long-term Treasury
purchase portion of its so-called Operation Twist.
This would be in addition to its program of buying mortgage
bonds each month in an effort to ease financial conditions enough
to lower the unemployment rate. The central bank's last Federal
Open Market Committee meeting of the year is next week. Before that
-- this Friday -- the U.S. will release its employment report for
November.
"We expect Operation Twist to be converted to outright purchases
at the December FOMC meeting," analysts at Barclays said. That's
still going to be in the background as other markets keep the
spotlight on the fiscal debate in Washington.
"Negotiations between the political parties about how to resolve
the fiscal cliff continue. We expect safe-haven yields to remain
resilient into year-end, given that negotiations are likely to be
protracted," Barclays analysts added.
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