TREASURIES-Long-dated prices fall as Fed holds off new QE
By Karen Brettell NEW YORK, April 25 (Reuters) - Longer-dated U.S. Treasuries ended lower on Wednesday, though intermediate dated-debt turned slightly positive, after the Federal Reserve showed no sign it was in hurry to embark on a third bout of bond purchases to stimulate the U.S. economy, even as unemployment remains high. U.S. government debt yields briefly spiked after the Fed members released economic and interest rate projections that included an increase in its economic growth forecast for 2012, but a drop in this forecast for the next two years. The debt yields ended relatively unchanged on the day as the Fed kept its monetary stance unchanged and as investors turned their focus to key employment data for May that will be released on May 4 for further clues about the economy's vigor. "I don't think anything happened today that's got anyone with a lot of conviction to move the market either direction from where we're at now," said James Newman, head of Treasuries and Agency trading at Keefe, Bruyette and Woods in New York. The Fed noted the unemployment problem was improving, though the jobless rate remains elevated. Unemployment is likely to remain the key driver of economic and rate projections, with data becoming increasingly important as the U.S. presidential race heats up. "The jobs thing is really what's driving the Fed. It's probably going to drive the next election, it's becoming bigger and bigger each month the closer we get to the election," Newman added. Treasuries prices briefly pared losses earlier on Wednesday on the government's report that durables goods orders in March fell 4.2 percent. This was the biggest monthly drop in three years, driven by a decline in aircraft demand and as global growth slows. Benchmark 10-year notes were last down 4/32 in price, yielding 1.99 percent, after earlier trading as high as 2.04 percent. They ended Tuesday at 1.97 percent. Five-year notes increased 1/32 in price to yield 0.84 percent, unchanged on the day. The 30-year bond fell 14/32 in price to yield 3.15 percent, up from 3.13 percent at Tuesday's close. EARLY AUCTION The Treasury earlier saw strong demand for its $35 billion sale of in five-year notes, with the auction being boosted by surprisingly strong interest from foreign central banks and other indirect bidders. The notes sold at a high yield of 0.887 percent, only slightly above the record auction low of 0.880 percent set back in December. The overall bidding was the strongest in three months. "Every auction statistic was encouraging," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee. The Treasury Department will complete this week's auctions with a $29 billion offering of new seven-year debt on Thursday at 1 p.m. (1700 GMT). In "when-issued" trading, the new seven-year issue was expected to yield 1.4130 percent early Wednesday afternoon, below the high yield of 1.5900 percent set at the March auction.
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