By Karen Brettell
NEW YORK, Oct 8 (Reuters) - U.S. Treasuries prices were
steady on Tuesday, with yields holding in the middle of their
recent range, as the U.S. government shutdown entered its eighth
day and investors were wary that the squabbling in Washington
could delay an increase in the debt ceiling.
The U.S. political gridlock has made many investors hesitant
to enter new trades as there are few signals from Washington
over when the shutdown or debt ceiling issue may be resolved.
Many U.S. economic releases issued by the government,
including Tuesday's international trade data and the crucial
monthly payrolls data that had been scheduled for last Friday,
have been also delayed by the shutdown, muddying insight into
the state of the economy.
'A lot of people are just sitting on their hands because
they don't even know how to play this, and the risk of being
offside is immense because this could be resolved anywhere from
the next minute to the next few weeks,' said Gennadiy Goldberg,
an interest rate strategist at TD Securities in New York.
U.S. Treasury Secretary Jack Lew has warned Congress the
United States would exhaust its borrowing capacity no later than
Oct. 17, at which point it would have only about $30 billion in
cash on hand.
Markets are likely to become more volatile as that date
approaches, as fears will likely grow that the political
dysfunction may be too great to pass a resolution to raise the
'As we get closer you will see the market start to care
quite a bit more; it will become more real,' said Goldberg.
Benchmark 10-year notes were last up 1/32 in
price to yield 2.62 percent, down from 2.63 percent late on
Monday. The yields have struggled to break below resistance at
around 2.60 percent.
The Treasury sold $30 billion in new four-week debt on
Tuesday at a high yield of 0.35 percent, the highest since
Some investors are avoiding shorter-dated bills that come
due in mid- and late October, which are most at risk of any
delay in being repaid.
'People are reluctant to own these shorter bills in the
event there is a delay in payment or a technical default,' said
Dan Mulholland, managing director in Treasuries trading at BNY
Mellon in New York.
One-month Treasuries bills yields jumped to 0.36
percent in secondary trading, the highest since February 2009.
One-month bill yields are approaching those of two-year debt , which pay 0.37 percent.
The Treasury will also sell $30 billion in three-year notes
on Tuesday, the first in $64 billion in new coupon-bearing
supply this week. It will sell $21 billion in 10-year notes on
Wednesday and $13 billion of 30-year bonds on Thursday.
With little clarity coming from Washington, many investors
will be looking for clues over central bank policy on Wednesday
when the Federal Reserve will release minutes from its policy
meeting last month, when it shocked markets by deciding not to
begin reducing its $85 billion a month bond-purchase program.
Traders will look for clues on what made the bank decide
against tapering and how close the decision was.
The Fed bought $1.46 billion in bonds due 2038 and 2043 on
Tuesday as part of its ongoing bond purchases.
(Additional reporting by Richard Leong; Editing by Chizu
Nomiyama and James Dalgleish)
Keywords: MARKETS USA BONDS/
(-------MARKET SNAPSHOT AT 11:40 a.m. EDT (1540 GMT)------- Change vs Current Nyk yield Three-month bills 0.0425 (+0.02) 0.043 Six-month bills 0.0675 (+0.03) 0.069 Two-year note 99-25/32 (-02/32) 0.369 Five-year note 99-28/32 (-) 1.404 10-year note 98-31/32 (+03/32) 2.619 30-year bond 98-31/32 (+07/32) 3.683 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 11.75 (-0.75) U.S. 3-year dollar swap spread 12.75 (-1.25) U.S. 5-year dollar swap spread 14.75 (-0.75) U.S. 10-year dollar swap spread 14.25 (-1.25) U.S. 30-year dollar swap spread -4.25 (-1.00))
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