Treasuries gain as Spanish finances add to European debt concern

May 25 (Bloomberg) -- Treasuries rose amid concern the European debt crisis will worsen as Spain’s regional governments are said to be struggling with finances, stoking demand for government debt.

Treasuries were poised for a second monthly gain as Spain’s Deputy Prime Minister Soraya Saenz de Santamaria said the country’s government is analyzing “with all caution” requests from regional governments to help them regain access to capital markets. Catalan President Artur Mas repeated his call for Spanish central government to help regions access funding at briefing with reporters today in Madrid.

“The report about more government intervention in Spain caused the market to get firm,” said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. “People are getting nervous about Europe.”

The U.S. 10-year yield fell three basis points, or 0.03 percentage point, to 1.77 percent at 10:19 a.m. New York time, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 added 9/32, or $2.81 per $1,000 face amount, to 100 1/32.

The yield has climbed two basis points this week, set for the first increase since the period ended March 16.

Holiday Trade

Treasury trading is scheduled to close at 2 p.m. New York time and remain shut on May 28 in observance of Memorial Day in the U.S., according to the Securities Industry and Financial Markets Association in New York.

Treasuries returned 1 percent this month as of yesterday, Bank of America Merrill Lynch indexes show, reflecting demand for the relative safety of U.S. government securities. They climbed 1.5 percent in April.

More than $4 trillion was erased from the value of global equities in the first three weeks of the month as concern deepened Greece will abandon the euro.

“People are worried about headlines that may come out of Greece,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York, one of 21 primary dealers that trade directly with the Federal Reserve. “There’s a flight-to- quality bid going on.”

Volatility was little changed yesterday at 73.1 basis points, according to Bank of America Merrill Lynch’s MOVE index, which measures Treasury price swings based on options. The gauge is below the one-year average of 87.8 basis points.

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