TREASURIES-Prices dip in profit-taking from recent rally

Thu Nov 15, 2012 9:37am EST

Related Topics

* Benchmark yields bounce off 10-week low touched on Tuesday
    * Superstorm Sandy pushes weekly jobless claims to 1-1/2
year high
    * No compromise seen soon in government's "fiscal cliff"
debate


    By Chris Reese
    NEW YORK, Nov 15 (Reuters) - U.S. Treasury debt prices eased
on Thursday as some investors took profits from a sharp rally
over the past week, although fears of a fiscal crisis were
likely to keep underlying demand firm.
    Treasuries pared early price losses after data showing much
higher-than-expected claims for jobless benefits in the latest
week after superstorm Sandy left tens of thousands of people out
of work.
    The jobless claims report "does suggest quite a weak
payrolls reading for November, but the weakness should be a
temporary thing," said David Sloan, economist at 4Cast Ltd in
New York, adding, "It does suggest the hurricane is going to
have a bigger short-term impact than expected."
    Treasuries have been rallying since last week following the
U.S. presidential election, as worries over the outcome of a
looming U.S. budget crisis have bolstered the safe-haven demand
for U.S. government debt.
    If the White House and a divided Congress do not produce a
deal on the federal budget before year-end, the series of 
automatic tax hikes and spending cuts known as the fiscal cliff
will come into effect early in 2013, hitting economic growth.
    President Barack Obama said on Wednesday that Republicans
would have to agree to raise taxes on the wealthy as the first
step in a budget deal. But top Republican lawmakers have been
steadfast in pushing to hold down tax rates for the wealthiest
Americans. 
    Few market players expect a compromise between the Democrats
and the Republicans any time soon, suggesting firm support for
Treasuries in coming weeks.
    A significant rise in Treasury yields was also limited after
San Francisco Fed President John Williams said late on Wednesday
the Federal Reserve would likely keep buying both
mortgage-backed securities and Treasuries until late 2013.
    Minutes of the Federal Reserve policy meeting in October, in
which a number of officials reckoned the central bank would need
to ramp up its bond buying to help the economy, also gave
Treasuries support.
    The minutes showed a number of Fed officials thought the
central bank would need to buy more bonds when its "Operation
Twist" program expires at the end of the year. 
    Still, investors moved to capitalize on the recent price
gains, and benchmark 10-year Treasury notes traded
4/32 lower in price to yield 1.61 percent, up from 1.59 percent
late Wednesday. Benchmark yields touched a 10-week low on
Tuesday of 1.57 percent.
    Superstorm Sandy drove new claims for U.S. jobless benefits
to a 1-1/2 year high last week at a seasonally adjusted 439,000,
the Labor Department said. That was the highest level since
April 2011 and well above the median forecast in a Reuters poll.
It was also the biggest one-week increase in new claims since
2005.
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A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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