* Yields climb from two-month lows touched last week * U.S. Treasury sells $13 bln in TIPS reopening * Investors prepare for $99 bln of notes sales next week By Chris Reese NEW YORK, Nov 21 U.S. Treasuries prices slipped for a third day on Wednesday in light trading volume as investors took profits on a recent rally that pushed yields to two-month lows, while the Federal Reserve sold short-term debt and the Treasury auctioned securities. The safe-haven value of Treasuries has been undermined this week by some expectations the government may be able reach an agreement to head off the so called "fiscal cliff" of tax increases and spending cuts set to kick in early next year. Republicans and Democrats remain deeply divided however over whether or not tax increases can be part of dealing with the U.S. budget deficit. "During the shortened holiday week we have witnessed the intermediate sector of the U.S. rates curve snapping back to the upper-end of the range," said George Goncalves, head of U.S. interest rates strategy at Nomura Securities International in New York. "We are not convinced that anything new has changed in the short-term on the fiscal front - next week there will be plenty of headlines to keep the market on edge - nor is European news that much more stable now than before. Price action feels like profit taking and no news is a good news week," Goncalves said. U.S. benchmark 10-year Treasury notes traded 6/32 lower in price to yield 1.69 percent, up from 1.66 percent late on Tuesday and off a two-month low of 1.57 percent touched on Friday. The Fed on Wednesday sold $7.67 billion in debt due 2015 and 2016 on Wednesday as part of its Operation Twist program, under which it is using short-term debt sales to fund purchases of longer-dated bonds. The Treasury also sold $13 billion in a reopening of 10-year Treasury inflation-protected securities. The notes sold at a high yield of minus 0.72 percent. "There is some supply to deal with and there's still a little bit of a 'risk on' move in the markets, so Treasuries are under a little pressure," said Rick Klingman, a Treasuries trader at BNP Paribas in New York. Investors were also looking to cheapen debt prices heading into the sale of $99 billion of notes next week. The Treasury will sell $35 billion of two-year notes on Tuesday, $35 billion of five-year notes on Wednesday and $29 billion of seven-year notes on Thursday. Treasury trading volume was light heading into Thursday's Thanksgiving holiday. The Treasuries market will be closed on Thursday and shut early at 2 p.m. EST (1900 GMT) on Friday. Treasuries gained in overnight trading after Greece's international lenders failed to reach a deal enabling them to release more aid to Athens. They later pared these gains on hopes that a deal will emerge. Euro zone finance ministers, the International Monetary Fund and the European Central Bank said they will meet again next Monday to try to pencil a deal on how to get Greece's debt down to a sustainable level. Bonds were little moved on Wednesday by data showing the number of Americans filing new claims for jobless benefits fell last week but remained high, a sign that storm Sandy in the northeastern United States on Oct. 29 is proving to be a substantial disruption to the labor market. "Initial claims were skewed by Sandy so it's very hard to know what the underlying trend is there," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia. The safety appeal of Treasuries was also undermined on Wednesday after Israel and the Islamist Hamas movement agreed to an Egyptian-sponsored ceasefire to halt an eight-day conflict around the Gaza Strip that many worried could escalate into wider violence in the Middle East.
Trending On Reuters