Treasuries fell for the first time in three weeks as talks collapsed between President Barack Obama and House Speaker John Boehner over a deficit-cutting package as part of an agreement that would lift the nation’s debt ceiling.
Two-year note yields touched the highest in almost two weeks July 21 as Standard & Poor’s reiterated it saw a 50 percent chance of cutting the U.S. credit rating within three months and European leaders reached a deal to stem Greece’s debt crisis. Boehner said yesterday after markets closed he will instead talk with Senate leaders on a way to avoid a U.S. default. The U.S. will sell $99 billion in notes next week.
“It’s certainly a negative thing for Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “The deep divisions between the parties make an agreement much tougher, but we still have the potential for 11th-hour emergency measures.”
Yields on benchmark 10-year notes rose six basis points, or 0.06 percentage point, to 2.96 percent yesterday in New York, from 2.91 percent on July 15, according to Bloomberg Bond Trader prices. The price of the 3.125 percent securities due in May 2021 fell 15/32, or $4.69 per $1,000 face amount, to 101 3/8.
Thirty-year bond yields increased one basis point to 4.26 percent. Two-year note yields were up three basis points to 0.39 percent and reached 0.41 percent on July 21, the highest level since July 8.
Treasuries pared weekly losses yesterday before Boehner’s announcement amid bets Obama and lawmakers would reach a deal to reduce the deficit, raise the debt limit and avert a default.
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