TREASURIES-Bond prices little changed before Bernanke

Mon Jan 14, 2013 3:32pm EST

Related Topics

* Fed's purchases support bids for long-dated bonds
    * Benchmark yields fall to lowest in about 1-1/2 weeks
    * Two Fed officials back Treasuries buy for now


    By Richard Leong
    NEW YORK, Jan 14 (Reuters) - U.S. government debt prices
were little changed on Monday with benchmark yields near their
lowest levels in about 1-1/2 weeks on the Federal Reserve's
purchase of long-dated bonds and safe-haven bids due to weaker
stock prices.
    The bond market's early gains were limited by caution on
possible hints from Fed Chairman Ben Bernanke on the central
bank's latest stand of quantitative easing ahead of its policy
meeting at the end of the month.
    "Some accounts were getting long going into this week. You
had some hedge funds buying earlier," said Carl Lantz, chief 
U.S. interest rate strategist with Credit Suisse in New York.
    On Monday, the Fed bought $1.47 billion in Treasuries with
maturities ranging from February 2036 to November 2042, which
was a part of its $45 billion monthly purchases of government
securities aimed to lower unemployment.
    The U.S. central bank has also been buying $40 billion in
mortgage-backed securities per month since September with the
goal of stimulating the housing market, whose recovery has
gained traction since late 2012.
    This third round of quantitative easing has been dubbed QE3.
    With the possibility of the economy picking up and stoking
inflation, the Fed's huge holdings of bonds complicates future
efforts to reduce them in a timely manner.
    "The market probably expects Bernanke to be hawkish. The
risk is that the Fed might end QE3 before the end of the year,
even though it's unlikely," Lantz said.    
    Benchmark U.S. yields climbed to 8-month highs near 2
percent in the first week of 2013 after minutes of the Fed's
December meeting showed several policymakers wanted to scale
back its purchases of Treasuries and mortgage-backed securities 
before year-end.
    But worries about the debt ceiling fight in Washington and
disappointing company earnings have revived the appetite for
Treasuries.
    Benchmark U.S. 10-year Treasury notes were last
up 1/32 in price, their yield at 1.859 percent after touching a
low of 1.831 percent earlier. The 10-year yield ended at 1.866
percent on Friday.
    On Wall Street, the three major stock indexes were narrowly
mixed in late trading, paring their early losses. 
    When the U.S. stock market closes at 4 p.m (2100 GMT),
Bernanke was scheduled to speak about monetary policy at an
event at the University of Michigan.
    Earlier, Chicago Fed President Charles Evans said the U.S.
economy is expected to grow by 2.5 percent in 2013, improving to
3.5 percent growth in 2014. Speaking at the Asian Financial
Forum in Hong Kong, Evans forecast the U.S. unemployment rate
would be 7.4 percent this year, and about 7 percent in 2014.
 
    Atlanta Fed chief Dennis Lockhart said later in a separate
event that the Fed's open-ended bond purchases are not "without
bound," adding that QE3 is not "QE Infinity."
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