Treasuries little changed as market awaits QE2 details

LONDON (BestGrowthStock) – U.S. Treasuries were broadly steady in European trading on Thursday as traders looked for more details of further quantitative easing the Federal Reserve is expected to unveil in two weeks’ time.

Analysts said the market could be in for a period of volatility in the first week of November when the next meeting of Federal Reserve Open Market Committee, U.S. midterm elections and the release of non-farm payroll figures all take place.

Weekly jobless claims due later in the session and the Federal Reserve of Philadelphia’s data on manufacturing in the Mid-Atlantic region could offer further catalysts for the market to rally if they reinforce the view of a faltering recovery.

Benchmark 10-year Treasury yields were unchanged at 2.484 percent, as were two-year notes at 0.3508 pct, keeping the 2/10-year curve steady around 213 bps.

Government paper was supported by a report on Wednesday from consultants Medley Global Advisors saying the Fed would buy $500 billion of Treasuries over six months from November in its second round of monetary stimulus, and leave room for further purchases.

“Fed comments and the Medley report suggest it’s going to be QE full steam ahead,” said James Knightley, a senior economist with ING in London. “The market is happy with that but we are going to remain in a sideways pattern and a narrow range until we get those numbers.”

The 10-year T-note yield was within a whisker of converging with its German counterpart, as the gap between them narrowed to 1 bp, the tightest since November 2009, as traders priced in diverging monetary policy outlooks between the Fed and the European Central Bank.

“Real money from the Asian central banks has been buying 10s and fast money is looking to sell 5s but the market is not getting too excited about that,” a trader said.

(Reporting by Nia Williams; Editing by Toby Chopra)

Treasuries little changed as market awaits QE2 details