TREASURIES-Yields near 10-month high before new note supply

Wed Feb 13, 2013 9:32am EST

Related Topics

* Yields rise before $24 bln 10-yr note sale
    * 10-year notes test technical support levels
    * Treasuries temporarily pare price losses on retail sales
data

    By Karen Brettell
    NEW YORK, Feb 13 (Reuters) - U.S. Treasuries yields rose to
approach a 10-month high on Wednesday, with benchmark notes
testing technical support levels that, if broken, could spark a
larger selloff, as banks and investors prepared to absorb new
supply of 10-year notes.
    The Treasury will sell $24 billion in 10-year notes
Wednesday, the second of $72 billion in new coupon supply this
week. It will also sell $16 billion in 30-year bonds Thursday.
    Preparation for the auction helped send 10-year note yields
 as high as to 2.03 percent on Wednesday, at the high
end of their recent trading range of around 1.90 percent to 2.03
to 2.06 percent.
    "We are at pretty critical juncture, I think it's going to
be important for the market to hold these levels on a short-term
basis," said Greg Faranello, a Treasuries trader at Societe
Generale in New York.
    If the 10-year notes yields hold a break above the 2.03
percent to 2.06 percent level, then technical analysis suggests
that the debt's yields may next increase to the 2.20 percent
area.
    Traders expect the new debt to price at around 2.05 percent
, according to trading in the "when-issued"
market.
    The debt pared some price losses, however, after data showed
little growth in consumer spending in January.
    U.S. retail sales barely rose in the month as tax increases
and higher gasoline prices restrained spending. nCATDDE9E4]
    Benchmark 10-year notes were last down 13/32 in price to
yield 2.03 percent, up from 1.98 percent late on Tuesday.
    Investors are focused on a package of automatic spending
cuts due to kick in on March 1, unless lawmakers agree on
alternative budget measures or delay negotiations to a later
date.
    The White House has said that cuts will harm economic
growth, though many lawmakers say reduced spending is necessary
to stabilize the country's rising debt load.
    Some analysts expect Treasury yields to fall in the weeks
heading into the debate deadline as investors adjust for the
likely impact of the spending cuts on the economy.
    The Federal Reserve will buy between $1.25 billion and $1.75
billion of debt due from 2036 to 2042 on Wednesday as part of
its ongoing bond purchase program.
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