TREASURIES-Prices slip as durable orders rise, supply looms

Mon Jan 28, 2013 2:09pm EST

Related Topics

* Gauge of business spending plans unexpectedly rises
    * 10-year yield breaks above 2 pct, first time since April
    * Treasury sells 2-year notes at a high yield of 0.288 pct

    By Luciana Lopez
    NEW YORK, Jan 28 (Reuters) - U.S. Treasuries prices dropped
on Monday after a gauge of planned U.S. business spending rose
in December and investors pushed for price concessions going
into debt auctions this week.
    The Commerce Department said on Monday non-defense capital
goods orders excluding aircraft, a closely watched proxy for
investment plans, edged higher in December by 0.2 percent where
the market had expected a small drop. 
    "Net-net this report actually winds up being modestly better
from a GDP perspective," said Tom Porcelli, chief U.S. economist
at RBC Global Markets in New York.
    But he cautioned that milestones later in the week -
including a Federal Reserve policy meeting and key U.S. jobs
data - could keep investors wary.
    "You're not going to want to be a hero here on Monday, not
with two major events still ahead of us," Porcelli said.
    Data showing contracts to buy previously owned U.S. homes
unexpectedly fell in December took the edge off losses.
    The National Association of Realtors said its Pending Home
Sales Index, based on contracts signed last month, dropped 4.3
percent to 101.7.
    The benchmark 10-year note was trading 8/32
lower in price to yield 1.98 percent, up from 1.95 percent late
Friday. The yield pierced 2 percent early in the session for the
first time since last April.
    The 30-year bond was last off 13/32 to yield
3.15 percent from 3.13 percent late Friday.
    The Treasury kicked off this week's debt supply with $35
billion in two-year notes on Monday. It will sell $35 billion in
five-year notes on Tuesday and $29 billion in seven-year notes
on Wednesday.
    The Treasury sold the two-year notes at a high yield of
0.288 percent, and with a bid-to-cover ratio of 3.77
. Treasury debt prices traded steady at lower
levels after the auction.
    On Wednesday the Federal Reserve caps a two-day policy
meeting. The statement will be scrutinized for signs of whether
the central bank is mulling ending its latest bond purchase
program this year.
    Minutes from the Fed's December meeting, released on Jan. 3,
showed that some voting members of the Fed's policy committee
opposed continuing bond buybacks, sparking speculation that the
central bank may end its latest round of quantitative easing
before year-end.
    On Friday, the Labor Department's monthly nonfarm payrolls
data could help clarify the state of the U.S. jobs market, which
policymakers have said is a key gauge of the recovery in the
world's biggest economy.
    "Policy seems to be on autopilot until the unemployment rate
gets to 6.5 percent," said Chris Rupkey, chief financial
economist at Bank of Tokyo-Mitsubishi UFJ in New York.
    The jobless rate was 7.8 percent in December.   
    Treasuries sold off last week partly on news that European
banks planned to repay more emergency loans than expected,
suggesting the region's banking sector was on the mend and
cooling demand for lower risk debt.
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