* Greek Leftists look to renege on bailout deal
* U.S. Treasury to auction $32 bln of 3-year notes
By Burton Frierson
NEW YORK, May 8 (Reuters) – U.S. Treasuries rose on Tuesday,
pushing benchmark yields to three-month lows, as difficulties of
Greek politicians in forming a government suggested markets
could be in for weeks of uncertainty over the euro zone debt
crisis.
Greek leftist Alexis Tsipras began efforts to form a
government by renouncing terms of the country’s international
bailout deal and threatening to nationalize banks. That helped
keep safe-haven assets such as Treasuries supported.
Greece’s pro-bailout parties failed to win a majority in
weekend elections, raising doubts the country will meet terms of
its bailout, avert bankruptcy and stay in the euro.
Markets confronted a long slog of uncertainty since Tsipras’
Left Coalition party faced tough odds in forming a government.
This left open the prospect of repeat elections in a few weeks.
Meanwhile, the approach of a $32 billion auction of
three-year notes at 1 p.m. held shorter maturities in check and
longer dated debt will face supply pressure due to auctions
later in the week.
“We’re still trying to figure out how to react to the events
over the weekend,” said Jim Kochan, chief fixed-income
strategist at Wells Fargo Advantage Funds in Menomonee Falls,
WI. “It’s just a continuation of a theme that we’ve seen for the
last year and that is movements in the Treasury market have been
dominated by events in Europe.”
“Unless Europe deteriorates further from here these yields
are going to prove to be unsustainably low,” said Kochan. Wells
Fargo Advantage Funds has $208 billion in assets under
management.
The benchmark 10-year note was last trading
14/32 higher in price, yielding 1.82 percent. Yields briefly
dipped below 1.82 percent, hitting their lowest since early
February.
This opened the way for a challenge of price resistance at
the 1.80 percent level in yields, which has proven to be tough
to crack in recent months.
Investors rejected a push through 1.80 percent in
late-January and early-February as well as in December.
Three-year notes prices were little changed,
yielding 0.36 percent.
The Treasury will also sell $24 billion of 10-year notes on
Wednesday and $16 billion of 30-year bonds on Thursday.
Thirty-year bonds were trading 28/32 higher in
price to yield 3.01 percent, down from 3.06 percent late Monday.
Earlier gains took them up a point in price.
Adding slight support to intermediate and longer dated debt,
the Federal Reserve bought $4.73 billion of Treasuries maturing
between May 2018 and April 2019.
The purchases were part of the Fed’s on-going stimulus
program, which markets refer to as “Operation Twist.”
