Steady prices, low volume in Treasury trading

By Emily Flitter

NEW YORK (BestGrowthStock) – Prices in the market for U.S. government debt were little changed on Wednesday, as traders awaited an appearance by Federal Reserve Chairman Ben Bernanke and the midsummer morning’s market volume remained light.

Bernanke’s testimony before the Senate Banking Committee on the state of monetary policy and the economy will be the main event of the day, and traders said they expected volume to pick up as his 2 p.m. appearance drew nearer.

Market participants will be watching for any hint of whether the Fed will implement another round of quantitative easing now that the U.S. economic recovery has slowed.

“Our view is no new surprises, so there’s no strategy for us there,” said Adam Brown, co-head of U.S. Treasury trading at Barclays Capital in New York. “If you have the view that he’s going to speak a lot about more QE you could go long (on the market).”

Brown said a Treasury rally was possible if Bernanke were to state the Fed’s intentions for further easing, though he thought such a statement was unlikely.

“If he doesn’t speak about it at all, some of the people that are already set up for it may need to reverse so there will be selling,” he added.

Brown predicted a yield range of between 3.12 percent and 2.90 percent for the benchmark 10-year Treasury note.

“We’d be shocked if we broke out of that unless there’s something really surprising,” he said.

But another 10-year yield call saw a much lower end to the possible range. In a note to clients, William O’Donnell, head of Treasury strategy at RBS Securities in Stamford, Connecticut, called for a range of between 2.75 percent and 3.33 percent for the coming quarter.

“Given the backdrop of long-term bullish momentum studies and supportive fundamentals (faltering global growth and looming fiscal austerity), I’d much rather buy that range support than sell the range resistance,” O’Donnell wrote. “Thus our tactics will almost exclusively discuss being long or flat, not short.”

The 10-year note was off 1/32 in price and yielding 2.96 percent. The 30-year bond was unchanged in price, yielding 3.98 percent.

Two-year Treasury notes traded unchanged in price for a yield of 0.59 percent, while the five-year note yield was steady at 1.70 percent.

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(Editing by Chizu Nomiyama )

Steady prices, low volume in Treasury trading