Washington: Treasury 30-year bonds rose, pushing yields close to the lowest level of the year, as the Federal Reserve began four consecutive days of purchasing debt without any new issuance for the first time since June.

US debt securities reversed earlier losses after the Fed bought $2.522 billion (Dh9.26 billion) of Treasuries in a session that took place three hours late because of technical difficulties. The central bank may buy as much as $15 billion in debt this week.

"The Fed purchases were constructive for the market, especially in a low-volume environment," said Ian Lyngen, a government-bond strategist at CRT Capital Group LLC in Stamford, Connecticut. "We are in a low-yield environment because nothing has changed of late in the global atmosphere — it's only gotten worse. Until there is some movement in policy, we will stay near these levels."

The 30-year yield fell one basis point, or 0.01 percentage points, to 2.90 per cent at 4.24pm in New York, according to Bloomberg Bond Trader prices. The 3.125 per cent note due in November 2041 rose 5/32, or $1.56 per $1,000 face amount, to 104 4/32. The ten-year yield fell one basis points to 1.86 per cent.

The gap between yields on two and ten-year securities, known as the yield curve, narrowed to 164 basis points from 177 basis points, a high for the year touched on January 6. On December 19 the gap touched 156 basis points, the lowest since October.

‘Resistance to sell'

The central bank bought debt maturing from 2036 through 2041, the New York Fed said in a statement yesterday. The purchases are part of a programme, known as Operation Twist, to replace $400 billion of shorter-maturity Treasuries in Fed holdings with longer-term debt to cap borrowing costs.

"There is resistance to sell ahead of buybacks this week and with no supply," said Sean Murphy, a Treasury trader in New York at Societe Generale, one of the 21 primary dealers that trade with the Fed. "We are still at safe-haven levels as Europe is still the dominant driver in the market."

Volatility in the Treasury market is near its lowest level in almost seven months. Bank of America Merrill Lynch's Move index, which measure price swings in Treasuries based on prices of over-the-counter options maturing in two to 30 years, rose to 79.2 basis points on January 13 after touching 77.1 a day earlier, the lowest level since June 13. The 2011 average was 94.14, with a high of 117.8 on August 8 and a low of 71.5 on May 31.

Treasury market volumes remain below average. About $224 billion of Treasuries changed hands on January 13 through ICAP Plc, the world's largest interdealer broker, below the one-year average of $282 billion and the five-year average of $270 billion.

Congress will joust over a symbolic vote on the US debt limit this week while a decision on whether to extend $3 trillion in tax cuts into 2013 probably will wait until after the November election.

The House returned yesterday from its holiday break and plans to vote on the debt limit today. Senators come back to Washington on January 23.

Inflation concern has fallen according to a measure of traders' expectations that the Fed uses to help determine monetary policy. The so-called five-year, five-year forward break-even rate, which projects what the pace of consumer-price increases will be for the five-year period starting in 2017, fell to 2.47 per cent, down from an average of 2.75 per cent of the past 12 months.

Consumer-price index

A report on January 19 is expected to show the US consumer-price index rose 0.1 per cent in December, according to the median forecast in a Bloomberg News survey.

Ten-year break-even rates, the difference between yields on ten-year inflation-indexed bonds and nominal Treasuries of the same maturity, touched two percentage points yesterday.

Washington (Bloomberg) The US suspended investments into a federal employee retirement fund to avoid breaching the $15.194 trillion (Dh55.8 trillion) debt limit.

Treasury Secretary Timothy F. Geithner informed Senate Majority Leader Harry Reid of the move in a letter yesterday. The so-called G-Fund will be "made whole once the debt limit is increased," Geithner said. Lawmakers this week will debate a symbolic vote on the debt limit. Under legislation passed in August after months of negotiations between the Obama administration and Republican lawmakers, the president has authority to veto any disapproval resolution that clears both chambers of Congress. The limit would then be raised on January 27. House Republicans plan to adopt a resolution tomorrow rejecting President Barack Obama's request to raise the debt limit by $1.2 trillion, though the measure will die either in the Senate or by presidential veto. That will allow Obama to lift the cap on his own after Republicans have gone on record against it.

The debt-ceiling increase is to meet commitments already made by the government. The Treasury has been relying on accounting manoeuvres to ensure the limit isn't breached.