TREASURIES-Yields fall from 10-mth highs, Europe GDP spurs buying

Thu Feb 14, 2013 9:13am EST

Related Topics

* Prices gain as weak European data spurs buying
    * Bonds briefly pare price gains as U.S. jobless claims fall
    * Treasury will sell $16 billion in new 30-year bonds

    By Karen Brettell
    NEW YORK, Feb 14 (Reuters) - U.S. Treasuries yields edged
back from 10-month highs on Thursday after data showed that the
euro zone's two largest economies shrank more than expected late
last year, helping boost demand for safe-haven debt.
    The German economy contracted 0.6 percent in the final
quarter of 2012, the worst performance since 2009, while
France's fell 0.3 percent, which was slightly worse than
forecast. 
    The news pushed the euro down against the dollar and boosted
bond buying, helping benchmark 10-year note yields fall from
10-month highs of 2.06 percent reached in overnight trading.
    "Treasuries followed the rally in (German) bunds, which was
driven by weak GDP data," said Carl Lantz, an interest rate
strategist at Credit Suisse in New York.
    The debt briefly pared some price gains after data showed
that the number of Americans filing new claims for unemployment
benefits fell more than expected last week, pointing to a
continued steady improvement in labor market conditions.
 
    "The market is viewing this as another sign that economic
momentum continues to be reasonably strong. Jobs are key because
of the Fed focus on unemployment and because now we need labor
income to continue to be quite strong because that will help
offset the negative spending implications of the payroll tax
increase," Lantz said.
    Ten-year notes were last up 10/32 in price to
yield 2.03 percent.
    The notes have been pushing up against technical support at
around 2.03 percent to 2.06 percent, which is the top end of
their trading range for the past few weeks. A break above this
level could send yields up towards the 2.20 percent area,
analysts and traders said.
    Prices gained even as the Treasury prepared to sell $16
billion in 30-year bonds on Thursday, it final sale of $72
billion in new coupon bearing debt this week.
    Thirty-year bonds rose 18/32 in price to yield
3.21 percent. Traders expect the new bonds to
price stronger at around 3.19 percent, according to trading in
the "when issued" market. 
    The Federal Reserve will also buy between $4.75 billion and
$5.75 billion in debt due 2017 to 2018 on Thursday as part of
its ongoing bond purchase program meant to help stimulate the
economy.
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