TREASURIES-Gain in Asia as market settles after selloff

Nov 23 (BestGrowthStock) – U.S. Treasuries edged up in Asia on
Friday as the market settled down from this week’s selloff,
with some investors viewing yields at six-month peaks as

Treasuries bounced back the previous day after a strong
auction of 30-year bonds showed some market players were ready
to start tip-toeing back in after the rout, which was
initially sparked by the surprise U.S. political compromise to
extend and broaden tax cuts.

President Barack Obama’s compromise on the Bush-era tax
cuts also included a payroll tax and renewed jobless benefits,
providing enough extra stimulus that economists have been
revising up growth forecasts for 2011 even while fretting
about the additional debt burden imposed by the deal.

PIMCO, the world’s biggest bond fund whose top portfolio
managers have been pessimistic about the U.S. recovery, has
also revived up its economic forecast for growth to a 3.0
percent to 3.5 percent pace by the end of next year.

Federal Reserve Chairman Ben Bernanke has said that more
fiscal support for the economy would be an important
complement to its efforts to revive growth and hiring.

Angry Democrats in the House of Representatives rejected
Obama’s plan to extend the tax breaks, but the proposal moved
forward in the Senate, where a vote was set for Monday.

“GDP is everything,” said Bernie Ward, head of non-yen
sales and trading at RBS in Tokyo. “We have to recognise the
small signs of traction in the economy.”

But Ward said that some investors, such as Asia-based
portfolio and reserve managers, had been spooked by this
week’s volatility and may sit on the sidelines through the end
of the year.

“Real money is not yet ready to buy until we see some
stability,” he said.

Five-year notes have been battered the most this week,
with traders citing talk of one big bond fund manager and
Japanese banks among the heaviest sellers as the move lower
built up a head of steam and triggered the break of technical
support levels.

In Asia, 10-year Treasury futures (TYv1: ) were up 8.5/32 at
121-1/32, having crawled up from a low of 120-4/32 touched on
Wednesday during the height of the selloff.

Ten-year Treasuries were up 8/32 in price to
yield 3.185 percent, off a six-month high of 3.330 percent
reached on Wednesday. For the week, yields were up 18 basis

Ward said 10-year yields could fall back towards 3.00
percent but would have trouble dropping much further than that
as the economy shows more signs of picking up steam. The
ongoing drop in continuing jobless claims to a two-year low
has signalled that employment is starting to improve.

Both futures and 10-year yields shot through the 200-day
moving average and 50 percent retracement of the markets
steady gains between April and October that drove 10-year
yields as low as 2.334 percent.

Five-year notes gained 5/32 to yield 1.862
percent, down 3 basis points on the day but still up 25 basis
points on the week.

Data later in the day include the October trade figures
and the Reuters/University of Michigan preliminary consumer
sentiment reading for December.

Market players are also eyeing next Tuesday’s Fed meeting,
the first since the central bank launched its plan to buy $600
billion of Treasuries to help the economy. The Fed is expected
to debate the effectiveness of the latest quantitative easing
and the expected stimulus from the expected tax cuts.

(Editing by Kim Coghill)

(Reporting by Eric Burroughs)

TREASURIES-Gain in Asia as market settles after selloff