U.S. 10-year yield close to 2-week low on Europe economy concern

Treasury 10-year note yields traded close to a two-week low as efforts to trim the European Union budget added to concern the region’s economy will struggle to expand, boosting demand for safer assets.

U.S. debt fluctuated after a report showed U.S. trade deficit narrowed more than forecast in December, led by record exports of petroleum that gave the world’s largest economy a boost at the end of 2012. Treasuries strengthened earlier today as German exports grew less than forecast in December, a report showed. U.S. 10-year yields were poised for the biggest weekly decline in more than two months.

“The concerns over Europe have taken the market up and seems to be the main driver of yields,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “The market is centered around the 2% level.”

The benchmark 10-year yield rose one basis point, or 0.01 percentage point, to 1.96% at 9:31 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.625% note due in November 2022 lost 1/32, or 31 cents per $1,000 face amount, to 97 1/32.

The yield reached 1.92% on Feb. 1, the least since Jan. 25. It has fallen five basis points this week, touching the biggest drop since the period ended Nov. 30.

Debt Sales

The Treasury kept next week’s so-called quarterly refunding auctions at $72 billion, the amount sold since November 2010. Given the government’s financing needs, it sells three-, 10- and 30-year securities each month in addition to its historical quarterly offerings.

The U.S. will sell $32 billion in three-year notes on Feb. 12, $24 billion in 10-year notes on Feb. 13, and $16 billion in 30-year bonds on Feb. 14.

U.K. Prime Minister David Cameron demanded cuts in a proposed seven-year subsidies package of 973 billion euros ($1.3 trillion). The amount was trimmed once, from 1.047 trillion euros in November, and it is less than the 994 billion euros spent in the budget period expiring this year.

“The numbers that were put forward were much too high,” Cameron told reporters yesterday. “They need to come down, and if they don’t come down, there won’t be a deal.”

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