TREASURIES-Bonds rise on Bernanke remarks, Europe worries

* Bernanke: Bond purchases beyond $600 billion possible

* Technicals, this week’s supply curb early market gains

* Fed buys $2 bln in long-dated government bonds
(Updates market action, adds quote)

By Richard Leong

NEW YORK, Dec 6 (BestGrowthStock) – U.S. Treasuries prices rose on
Monday after U.S. Federal Reserve Chairman Ben Bernanke said
more bond purchases were possible and as jitters over sovereign
debt problems in Europe sparked a safe-haven bid.

The Fed’s purchase of $2 billion in long-dated U.S.
government debt on Monday also buoyed the market, snapping a
three-day losing streak among long-dated issues. For more see

Gains were limited, however, as investors prepared for this
week’s $66 billion in coupon-bearing supply. Traders have also
been selling into strength, either to lock in short-term
profits or to unwind earlier positions tied to the Fed’s latest
quantitative easing program, dubbed QE2.

Bernanke’s latest comments, made on the CBS television
program “60 Minutes” that aired Sunday evening, were viewed as
assuring investors that the U.S. central bank is committed to
completing its $600 billion bond purchase program and to quell
criticism that QE2 will lead to future inflation.

“The first point is that QE2 will get done. The second
point is that Bernanke will steam ahead to do what it takes” to
help the U.S. economy, said Eric Green, chief of U.S. rates
research and strategy at TD Securities in New York.

Bernanke said the U.S. central bank could increase its
commitment to buy $600 billion in U.S. government bonds if the
economy fails to respond or unemployment stays too high. For
details see [ID:nWAL5NE6UB].

The rare Bernanke interview came after Friday’s
disappointing jobs report, which raised doubt over the pace of
the U.S. economic recovery.


Investor focus on developments in Europe also supported
bond prices, as persistent anxiety over the region’s debt
crisis increased the risk premiums on euro zone periphery
members such as Ireland, Portugal and Spain.

The risk premiums widened on Monday even after the European
Central Bank late last week engineered a dip in the soaring
borrowing costs of weaker euro zone states by buying more bonds
of mainly Irish and Portuguese bonds.

“There is a widening in Irish and Portuguese sovereign
credit, which has been linked to better Treasuries
performance,” said Guy LeBas, chief fixed income strategist
with Janney Montgomery Scott in Philadelphia.

Portuguese 10-year bond yield (PT10YT=TWEB: ) ended up 2
basis points to 6.10 percent after rising as much as 13 basis
points, while Irish 10-year debt yield (IE10YT=TWEB: ) rose 8
basis points to 8.54 percent. [ID:nLDE6B51WU]

In contrast to the rise in peripheral yields, benchmark
10-year Treasury notes (US10YT=RR: ) traded up 16/32 in price to
yield 2.94 percent, down from 3.01 percent on Friday.

The inability of the 10-year yield to pierce below chart
resistance at 2.90 percent suggests it will hover around the
3.00 percent mark in the short term, analysts said.

The 30-year bond (US30YT=RR: ) was up 22/32 in price for a
yield of 4.28 percent, down from 4.32 percent late on Friday.

Investors appeared reticent to jump back into bonds after
Friday’s jobs report showed a surprise rise to 9.8 percent in
the unemployment rate and a tepid job growth of just 39,000 in
November, analysts said.

The jobs figures came after a batch of better-than-expected
economic readings in the United States and other parts of the

“It’s not as bad as it looks,” TD’s Green said. “There is
more strength in the economy than what the headlines suggest.”
(Reporting by Richard Leong; Editing by Leslie Adler)

TREASURIES-Bonds rise on Bernanke remarks, Europe worries