TREASURIES-Prices steady as debt sales offset expected Fed program

Wed Dec 12, 2012 12:07pm EST

Related Topics

* Fed expected to announce $45 bln/month of Treasury buying
    * Price losses pared after 10-year notes sale
    * Benchmark yields range-bound in "fiscal cliff" worries

    By Chris Reese
    NEW YORK, Dec 12 (Reuters) - U.S. Treasury debt prices were
trading little changed on Wednesday as investor efforts to force
price concessions going into debt sales this week offset bidding
in preparation for the Federal Reserve to unveil more stimulus
measures.
    The Federal Reserve's two-day policy meeting concludes on
Wednesday, with the central bank expected to announce it will
buy $45 billion per month of longer-dated Treasuries in the new
year as a replacement for the current "Operation Twist" stimulus
program.  
    Under Twist, the Fed is selling shorter-dated Treasuries and
using the proceeds to buy longer-dated debt. The program is set
to expire at the end of December, and analysts say the Fed has
little to no shorter-dated debt to sell.
    Any positive price impact on Treasuries from the expected
announcement of more Fed buying was likely to be offset by
investor reluctance to push yields lower ahead of government
debt auctions this week and next, said John Briggs, Treasury
strategist at RBS Securities in Stamford, Connecticut.
    "We see more of the same (from the Fed) - the same without
the front-end purchases. That in itself likely produces an
initially positive Treasury market reaction, but as it is the
general consensus I don't think it takes us through range
resistance ahead of six auctions in seven days," Briggs said.
    Treasuries pared early price losses on Wednesday following
strong demand in the sale of $21 billion of 10-year notes. After
the auction the benchmark notes were trading
unchanged in price to yield 1.66 percent. Yields on Wednesday
had risen to as high as 1.67 percent.
    The Treasury on Thursday will sell $13 billion of 30-year
bonds and next week will auction two-year, five-year and
seven-year notes, along with five-year Treasury
inflation-protected securities. The Treasury on Tuesday sold $32
billion of three-year notes.
    Investors often push for price concessions going into such 
auctions.
    Benchmark yields have been hovering in a range of 1.56
percent to 1.70 percent since early November, getting price
support from worries policymakers may not reach an agreement to
avoid the "fiscal cliff" of recession-inducing tax hikes and
spending cuts set to kick in next year.
    Safe-haven support for Treasuries has also been underpinned
in recent months by worries over the credit crisis in Europe and
its potential impact on global economic growth.
    On what is already proving to be a busy day in debt markets,
the corporate debt market was also set for action with six new
investment grade deals and the Qatar Telecom launch of
$1 billion deal on Wednesday, along with four high-yield deals
announced.
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