Germany and France denied a media report they were planning to give financial aid to Greece, whose budget deficit hit an estimated 12.7 percent in 2009 and Greece's prime minister, George Papandreou, said Greece sought to borrow funds only through the markets and was being targeted by speculators. A US Senate vote on whether to support Federal Reserve chief Ben Bernanke's nomination for a second term was expected at the end of the day.
The latest result of an ongoing Reuters poll of US senators on whether they would support Bernanke's nomination to another four-year term had 51 senators voting yes (36 Democrats, 14 Republicans, 1 Independent); 23 voting no (6 Democrats, 16 Republicans, 1 Independent), and 26 still undecided (16 Democrats, 10 Republicans).
Amid the general uncertainty, a $32 billion auction of seven-year US Treasury notes drew strong demand. Tom diGaloma, head of fixed-income rates trading at Guggenheim Securities in New York, said fallout from Greece and US stock market losses inspired an "excellent showing" by domestic money managers at the auction.
Some selling occurred after the auction, however. "It was a strong auction, but the issue was expensive relative to other maturities on the curve and the selloff afterward was not surprising given the weakness in the back end of the curve all day," said John Spinello, senior vice president and chief fixed-income technical strategist at Jefferies & Co Inc in New York City.
Weaker-than-expected economic data also bolstered shorter-dated Treasuries, offering evidence that the Fed should be in no hurry to raise interest rates. New jobless claims were more numerous than expected in the latest week while December orders for durable goods came in weaker than expected. Two-year notes rose 2/32, their yields easing to 0.88 percent from 0.92 percent before the statement. The price on benchmark 10-year Treasury notes was unchanged at 97-22/32, its yield at 3.66 percent.