HUANYU GROUP

TREASURIES-U.S. 7-year yield higher in thin Asian trade

Published: 2009-08-04 14:17:01

SINGAPORE, July 20 - U.S. Treasuries barely traded in Asia, with Japan on holiday, but rising Asian stocks point to steadily improving risk appetite and room for further falls in safe-haven bonds.

* Seven-year Treasuries is among the few trades seen on Monday, with its yield rising to 3.2409 percent from Friday's 3.204 percent in New York.

* Ten-year bonds untraded, according to Reuters data. Yields were at 3.65 percent in New York late on Friday.

* The 7-year yield has climbed nearly 35 basis points in the past week's sell-off spurred by surprisingly robust financial sector earnings last week, improved housing starts numbers and finally the prospect U.S. lender CIT may avoid bankruptcy.

* CIT group Inc, a lender to a large number of small and medium sized businesses, signed a deal late on Sunday for $3 billion in rescue financing from its bondholders, a plan that could help avert bankruptcy.

* Five-year yields have risen 25 bps in the past week to 2.51 percent, impacted by the heavy bearishness on that sector as growing optimism over the economy raises expectations of aggressive monetary tightening and steepens the money market curve.

* Fixed income market waits for Fed Chairman Ben Bernanke's semi-annual monetary policy testimony on Tuesday but expects him to reiterate the Fed's view revealed in policy meeting minutes last week, which were bearish Treasuries.

* Analysts expect Bernanke will hint the Fed's Treasury purchase plan will not be extended beyond September, while sounding hopeful about the economic recovery and dispelling fears of deflation.

* DBS Bank says in a note such a testimony from Bernanke will cause front end of Treasury curve to steepen further, while keeping 10-year yields between 3 and 4 percent for the rest of 2009.