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US Treasury prices recover slightly

As the US government comes to the end of a $101 billion bond auction traders are breathing a sigh of relief after the last $26 billion auction went relatively well. Despite the fact that yesterday saw a significant fall in Treasury prices across the board, there was something of a recovery today even though many analysts have grave fears about the state of the US economy.

While there is no doubt that the US authorities will need to raise further significant capital in the short to medium term many believe that the government will give the green light for further bond and Treasury purchases using taxpayers funds. There is a feeling that the recent fall may well have been overdone, at least in the short term, and could tempt the authorities back into the market. So whether today's bounce is based upon hopes for the economy or a technical situation remains to be seen.

It will be interesting to see how the UK markets react to the inevitable fund-raising exercises in the future with the UK government in desperate need of capital to service debt. Will UK and overseas investors be willing to put up billions of pounds of money in return for government bonds or will the authorities be left to lick their wounds and look elsewhere?

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