TREASURIES-Prices fall on euro zone recovery signs
* 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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