TREASURIES-Prices fall on euro zone recovery signs

Fri Jan 25, 2013 12:40pm EST

Related Topics

* Bunds fall after rise in German sentiment in January
    * Banks to repay early more ECB loans than expected
    * US fiscal uncertainty gives Treasuries longer-term support


    By Chris Reese
    NEW YORK, Jan 25 (Reuters) - U.S. Treasury debt prices fell
for a second day on Friday after better-than-expected euro zone
data and news that banks would pay back a bigger-than-expected
amount of loans to the European Central Bank spurred selling of
safe-haven U.S. government debt.
    Low-risk bonds in the United States and Europe weakened
after a German business sentiment survey from the Ifo think tank
improved for the third consecutive month in January.
 
    Investors' appetite for risk was also bolstered after the
ECB said banks would hand back early more cash than expected
from cheap loans, called LTROs (long-term refinancing
operations), which was seen as a sign at least part of the
financial system is returning to health. 
    "Strong Ifo data pushed the Bunds lower and Treasuries
followed," said Tom di Galoma, managing director at Navigate
Advisors LLC in Stamford, Connecticut, adding "the LTRO
repayment data also came in above consensus."
    Benchmark 10-year notes were trading 20/32 lower
in price to yield 1.92 percent, up from 1.86 percent late
Thursday. Benchmark yields are on track to finish eight basis
points higher on the week.
    Thirty-year bonds were trading 1-9/32 lower in
price to yield 3.12 percent from 3.05 percent late Thursday.
    Investors are looking ahead to U.S. January non-farm
payrolls data next week for any confirmation the labor market is
showing signs of recovery after last week's claims for jobless
benefits fell to the lowest in five years. 
    "The 1.97 percent high yield in 10-year notes is support
from the first week of this year, but with euro rates pushing
higher and claims continuing to make five-year lows, many
forecasts for payrolls are being pushed higher and a break of
1.97 percent would appear likely," said Richard Gilhooly,
interest rates strategist at TD Securities in New York.
    Analysts polled by Reuters expect government data next
Friday to show U.S. employers added 155,000 jobs in January, on
par with the 155,000 new positions added in December. The
unemployment rate is expected to hold steady at 7.8 percent.
 
    Over the longer-term however, U.S. bonds remain supported by
an uncertain fiscal outlook, with mixed forecasts for the
economy amid worries over the United States' postponed debt
limit and pending automatic budget cuts.
    The selling in Treasuries was unaffected by data showing new
U.S. single-family home sales fell in December, although the
median sales price rose in a signal the housing sector may
contribute to the U.S. economic recovery. 
    The Federal Reserve on Friday bought $3.708 billion of
Treasuries maturing October 2018 through December 2019 as part
of its latest economic stimulus program.
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