Il T-Bronx conferma la sua fama di selvaggia "imprevedibilità"
le ultime righe di sto report portano una spiegazione plausibile- note magic word: convexity buying
Treasuries firm, relieved after Greenspan comments
NEW YORK, June 7 (Reuters) - U.S. Treasury debt prices rose on Tuesday after comments from Federal Reserve Chairman Alan Greenspan overnight were interpreted as leaving open the possibility of a pause in U.S. interest rate hikes.
Discussing why long-term rates have remained persistently low despite a string of Fed rate increases over the past year, Greenspan said the idea that markets were signaling economic weakness was "certainly a credible notion."
That was bullish enough for bonds to send benchmark 10-year notes <US10YT=RR> 6/32 higher for a yield of 3.93 percent, down from 3.96 percent on Monday.
"He opened the door a little bit to a Fed pause, and to the chance that maybe the economy hasn't been quite as strong as he had been saying," said Gerald Lucas, chief Treasury and agency strategist at Banc of America Securities.
Still, not all of Greenspan's statements were friendly to bonds. In typical noncommittal fashion, the Fed chief also suggested that low long-term rates could also be seen as the result of new forces, which he went on to describe at length.
But his mere failure to dismiss comments made by Dallas Fed President Richard Fisher implying through a baseball analogy that the monetary tightening cycle was near an end came as a big relief to bond investors.
That relief allowed five-year notes <US5YT=RR> to add 1/32 in price to yield 3.71 compared with 3.72 percent on Monday. The 30-year long bond <US30YT=RR> was 22/32 higher and yielding 4.20 percent, down from 4.24 percent on Monday.
Two-year notes <US2YT=RR> were more subdued, staying put for a yield of 3.57 percent. The preference for longer-dated maturities also further flattened the yield curve, pushing the spread between 10- and two-year debt to a four-year low of 35 basis points.
Greenspan reviewed and played down many of the explanations in the market for low long-term rates, such as buying by Asian central banks or pension funds looking to match assets and liabilities, but gave no decisive conclusion on the issue.
"Greenspan's comments are being viewed as he has given up trying to explain the lower rates, and some are focusing on his 'economy may be weaker than expected' statement," said Andrew Brenner, head of fixed income at Investec U.S.
FED SPEAKER BONANZA
A number of other Fed officials are set to speak on Tuesday, most notably the Dallas Fed's Fisher. Fisher, a relative newcomer to the Fed, will speak on the global economy at about 1 p.m. EDT (1700 GMT).
Greenspan did not address Fisher's earlier comments on rates but traders expect the Fed chairman to give some clues on the fate of short-term interest rates when he addresses the Joint Economic Committee in Washington D.C. on Thursday.
Other speakers on Tuesday include Atlanta Federal Reserve President Jack Guynn who speaks in Atlanta to financial analysts at 12:30 p.m. (1630 GMT) and Fed Governor Edward Gramlich, who speaks in Milwaukee at 8 p.m. (0000 GMT on Wednesday).
Earlier on Tuesday, Fed Governor Susan Schmidt Bies did not touch on the economy when she spoke at a bankers' meeting.
REFI WAVE?
One factor brewing on the perimeter of the rallying bond market along with persistently low rates is the possibility of a new wave of buying from mortgage bond players who may soon face prepayments as homeowners get tempted into refinancing.
This 'convexity buying' of Treasuries by mortgage bond players, who must realign their portfolios when faced with home loan refinancing, pushes down benchmark Treasury yields.
Falling mortgage rates created significant refinancing waves through most of 2002 and 2003, and those created surges of convexity buying in the Treasuries market that pushed yields down. But most of that activity has since dried up.
Traders and analysts say yields on the 10-year note would have to be in the vicinity of 3.85 percent to trigger significant refinancing.
That yield plunged briefly below 3.84 percent last Friday following a weak May payrolls report, but the market changed course and ended the day at 3.97 percent.
"Of course, rates have to stay there (at around 3.85 percent) for a while to give people a chance to react, and they didn't stay there on Friday, said Christopher Low, chief economist at FTN Financial in New York.
