The Daily Item, Sunbury, PA

Fiscal Cliff

December 27, 2012

Treasuries gain as Reid says talks probably won’t make deadline

By Cordell Eddings and Susanne Walker

Bloomberg News


NEW YORK — Treasuries rose for a second day as investors sought safety after Senate Majority Leader Harry Reid, D-Nev., said the budget stalemate that threatens to push the economy into recession probably won’t be resolved by year’s end.

U.S. government bonds pared gains as House Majority Leader Eric Cantor, R-Va., said his chamber of Congress will convene Sunday on the eve of the deadline. Treasuries reached highs of the day after Reid said on the Senate floor “nothing’s happening” on talks to avert $600 billion in tax boosts and spending cuts set to start in January. He said Republicans wouldn’t cooperate.

“It’s clear heels are dug in in Washington, and we seem to be moving further away from a resolution and closer to the possibility of going over the cliff,” said Scott Graham, head of government bond trading at Bank of Montreal’s BMO Capital Markets unit in Chicago, one of the 21 primary dealers that trade with the Federal Reserve. “The fear and worry is pushing stocks lower and Treasuries higher.”

The benchmark 10-year note yield declined two basis points, or 0.02 percentage point, to 1.74 percent at 5 p.m. in New York, according to Bloomberg Bond Trader prices. It touched 1.7 percent, the lowest level since Dec. 14, after rising earlier as much as three basis points. The price of the 1.625 percent security due in November 2022 increased 1/8, or $1.25 per $1,000 face amount, to 99.

Thirty-year bond yields fell one basis point to 2.91 percent after dropping earlier as much as five basis points.

“The fiscal-cliff back-and-forth is driving the market,” said Ian Lyngen, a government bond strategist at CRT Capital Group in Stamford, Conn. “We find ourselves in an environment where the economic data is not that important in the contest of what could or could not happen in 2013, depending on how the fiscal cliff gets resolved.”

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