TREASURIES-Prices flat as profit-taking offsets month-end buying
* Benchmark yields end the week 7 basis points lower * "Fiscal cliff" worries underpin support for bond prices * Consumer, factory data support view of fragile U.S. growth By Chris Reese NEW YORK, Nov 30 (Reuters) - Benchmark U.S. Treasury debt prices were little changed on Friday as profit taking from four days of price gains was offset by safe-haven bidding on anxiety about the lack of progress in budget talks in Washington. The market has been volatile as investor sentiment changes on whether U.S. President Barack Obama and Congress will reach a timely budget compromise to prevent a series of tax increases and spending cuts from phasing in next year. This $600 billion fiscal contraction, dubbed the "fiscal cliff", could cause a U.S. recession, according to economists, and market players have bought and sold Treasuries in reaction to recent public remarks from leading Democratic and Republican lawmakers. Benchmark 10-year Treasury notes rose for a fifth day on Friday, albeit very marginally. Ten-year notes last traded 2/32 higher in price with the yield little changed from late Thursday at 1.62 percent. Benchmark yields have dipped by seven basis points in November for the largest monthly fall in yield since July. On the week, yields also fell by seven basis points for the largest weekly dip since the first full week of November. For the past week, "the essence of the matter is, of course, the fiscal cliff negotiations which seem to be going nowhere in a hurry," said David Ader, head of government bond strategy at CRT Capital in Stamford, Connecticut, adding there is "a scary sense that both sides remain very far apart which leaves uncertainty close at hand." Obama, a Democrat, on Friday said a "handful of Republicans" in the House of Representatives were holding up legislation to extend tax cuts for middle-class Americans in order to try to preserve them for the wealthy. He spoke during a visit to a factory in Pennsylvania in an effort to press his case for raising taxes on the wealthy to narrow the deficit. The budget standoff is exacerbating a fragile economic backdrop where growth is still weak and unemployment remains historically high, analysts said. "If we don't get a quick resolution, each day it will add a bid to the Treasuries market," said Wilmer Stith, co-portfolio manager of the Wilmington Broad Market Bond Fund in Baltimore. Government data on Friday showed Americans cut back spending for the first time in five months in October, while a private report showed business activity in the upper Midwest region barely grew in November. A wobbly economy together with the risk from the "fiscal cliff" will likely cause the Federal Reserve to cling to its ultra-loose monetary policy, analysts said. The Fed bought $1.85 billion in Treasuries that mature in Feb. 2036 through Nov. 2042, which was its latest purchase for 'Operation Twist.' This program due to expire at year-end was intended to lower interest rates in an effort to support the economy. Overall, the Fed bought about $16.77 billion of longer-dated Treasuries in six operations this week, which some market players said helped to bolster Treasuries prices this week. Month-end position-squaring also lent support to Treasuries prices, as some bond fund managers matched month-end duration changes on their benchmark Treasuries indexes. This typically involves the purchases of longer-dated bonds. Thirty-year Treasury bonds on Friday traded 8/32 lower in price to yield 2.81 percent, up slightly from 2.80 percent late Thursday.
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