By Deborah Levine
Treasury prices were slightly lower Monday, reversing earlier
declines as companies in several industries announced plans to
slash jobs.
The two-year note (UST2YR) yielded 0.83%.
Ten-year note yields (UST10Y) rose 1 basis point, or 0.01%, to
2.63%. Bond prices move inversely to their yields.
Construction-equipment maker Caterpillar (CAT) said it would cut
20,000 jobs, and Home Depot (HD) said it would cut its workforce by
about 7,000 jobs.
Sprint Nextel (US-S) it will eliminate 8,000 jobs in the first
three months of 2009.
Bonds remained under pressure, though, from a slew of government
debt auctions this week that will start with $57 billion in bills
and $8 billion in 20-year inflation-indexed securities.
Bids for three- and six-month bills will be accepted until 11:30
a.m. Eastern time. The sale of Treasury Inflation Protected
Securities, known as TIPS, will end at 1 p.m.
The Treasury Department also will put record amounts of two- and
five-year notes up for bid, reducing investors' willingness to buy
higher amounts at yields already near the lowest ever.
"We see bond markets under pressure as actual and planned
issuances surge," especially as foreign official buyers having less
ability to invest in U.S. debt, said analysts at UBS
Securities.
More proof of a weak economy may be in a report at 10 a.m.
Eastern time that's expected to show U.S. sales of existing homes
slowed to a 4.36 million pace in December, according to the median
estimate of economists surveyed by MarketWatch.
The dearth of job cuts may work against the bond market though,
if it leads the government to increase its already mammoth stimulus
proposal.
Longer-term "bonds are off on the continuing realization of
stimulus funded by supply" of more debt, said Andrew Brenner,
co-head of structured products and emerging markets at MF
Global.
Also of concern to bondholders, Timothy Geithner is expected to
be confirmed as Treasury Secretary on Monday, opening up the
possibility of more details on the Obama Administration's stimulus
proposal.
Possibly a threat to bond investors "will be the formal approval
of Geithner and his coming forth with more details on the stimulus
package, for example homeowners relief, which could add to deficit
concerns and, imagine, boost equity market confidence," said David
Ader, U.S. government bond strategist at RBS Greenwich Capital.
Also on tap this week is the Federal Reserve's policy meeting.
Analysts don't expect any changes to the central banks' target
overnight interest rate between banks, already dropped to a range
of zero to 0.25% last month.
Policy makers are unlikely to say much different after they meet
on Tuesday and Wednesday, having already affirmed they are ready to
pull out all the stops to help the economy and stabilize financial
markets.
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