The Daily Item, Sunbury, PA

Fiscal Cliff

December 27, 2012

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


Long-bond yields reached a three-month high of 3.03 percent and 10-year yields touched a seven-week high of 1.85 percent on Dec. 18 on bets U.S. leaders would resolve the budget showdown.

The Treasury holdings of primary dealers increased 7 percent to a record $145.7 billion as of Dec. 19, the Fed reported Thursday. Ownership of U.S. government securities has risen for four consecutive weeks by a total of $41 billion, central bank data show.

U.S. government securities returned 2.1 percent in 2012 on an annualized basis through Wednesday, set for the worst performance since a 3.7 percent loss in 2009, according to Bank of America Merrill Lynch indexes. The Standard & Poor’s 500 Index gained 15 percent, including reinvested dividends, amid signs the U.S. economy is improving.

Treasuries have lost 0.2 percent this quarter and 0.6 percent this month, Merrill Lynch index data show.

President Obama and House Speaker John Boehner, R-Ohio, were unable to agree before Christmas on the tax-rate increase on top earners that Obama sought to lower the budget deficit or the cuts to entitlement programs Boehner wanted.

“I don’t know time-wise how it can happen now,” said Reid, blaming Boehner and Senate Minority Leader Mitch McConnell, R-Ky.

The House will convene Sunday evening, with the first votes planned about 6:30 p.m., Cantor said in a message posted on Twitter. Members may meet through Wednesday.

House and Senate leaders plan to meet Friday with Obama as the budget deadline approaches, said Illinois Sen. Dick Durbin, the second-ranking Senate Democrat.

The Congressional Budget Office has said the automatic tax increases and spending reductions would probably lead to a recession in the first half of 2013.

Treasury Secretary Timothy Geithner said Wednesday he will take “extraordinary measures” to postpone a U.S. default into early 2013 while Obama and Congress work out a deficit- reduction deal.

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