TREASURIES-Prices rise on worries over US, European business conditions

Thu Feb 21, 2013 11:14am EST

Related Topics

* Surveys show downturn in euro zone businesses
    * U.S. weekly jobless claims rise by more than expected
    * Philly Fed business conditions in January lowest in 8
months
    * Treasuries underpinned by concern over government spending
cuts


    By Chris Reese
    NEW YORK, Feb 21 (Reuters) - U.S. Treasuries rose on
Thursday as worries over a lack of economic recovery in Europe,
along with a struggling labor market and tepid business
conditions in the U.S., prompted investors to buy assets
perceived as safe havens.
    Treasuries were bolstered early in the day as prospects the
debt-laden euro zone might soon emerge from recession were
shaken, with surveys showing business indicators unexpectedly
worsened this month, especially in France. 
    Prices extended gains after data showing the number of
Americans filing new claims for unemployment benefits rose by
more than expected last week. Prices were also bolstered after
the Federal Reserve Bank of Philadelphia's index of business
conditions was shown to have fallen in February to the lowest
since June 2012. 
    "This data suggests the economy might not be as strong as
people are expecting," said Adam Sarhan, chief executive of
Sarhan Capital in New York.
    Benchmark 10-year Treasury notes were trading
12/32 higher in price to yield 1.97 percent, down from 2.01
percent late Wednesday but still well within the 1.93 percent to
2.06 percent range that has held sway for over three weeks.
    "The job market is gradually improving but not fast enough
for the Fed to remove accommodation. We still think a Fed rate
hike is a late 2014 to early 2015 event. They might taper off
bond purchases in the fourth quarter," said Jacob Oubina, senior
economist at RBC Capital Markets in New York.
    U.S. bonds weakened briefly on Wednesday as the latest
minutes from the Federal Open Market Committee showed
policymakers discussed slowing or stopping Federal Reserve bond
purchases aimed at reducing unemployment. 
    They later rebounded as a sharp fall in stock prices
rekindled some safe-haven bids for bonds.
    The Fed on Thursday was buying $3 billion to $3.75 billion
of Treasuries maturing November 2018 through February 2020 as
part of its latest economic stimulus program. The central bank
is purchasing $45 billion per month of Treasuries and $40
billion per month of mortgage-backed securities in an effort to
reduce unemployment and spur economic recovery.
    Treasuries prices remain underpinned by concerns over the
potential economic impact of $85 billion of automatic government
spending cuts set to kick in March 1. Few analysts expect
Republicans and Democrats to reach any sort of budget agreement
to avoid the cuts before the deadline.
    Outside of the Philadelphia Fed and weekly jobless claims
data, the government said consumer prices were flat in January
while U.S. home resales edged higher last month.  
    There will also be an auction of 30-year Treasury Inflation
Protected Securities later on Thursday.
    Ahead of the sale, 30-year Treasury bonds were
trading 28/32 higher in price to yield 3.16 percent, down from
3.20 percent late Wednesday.
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