TREASURIES-U.S. bond prices rise after tepid data

Thu Apr 18, 2013 3:07pm EDT

Related Topics

* Resistance cited at 1.671 percent on 10-year yield
    * Economic data points to 'soft patch,' supports bonds
    * TIPS auction comes in weak

    By Luciana Lopez
    NEW YORK, April 18 (Reuters) - Prices for U.S. Treasuries
gained on Thursday as lukewarm data pointed to a long slog of a
recovery in the world's biggest economy, fueling bids for
safe-haven investments.
     The number of Americans filing new claims for unemployment
benefits rose last week and factory activity in the nation's
Mid-Atlantic region cooled in April, further signs of a
moderation in economic growth. 
    "Over the last month to month and a half, the bond market
has anticipated that we are entering a soft patch, and today's
economic statistics were mostly soft and supported that view,"
said Dan Heckman, senior fixed-income strategist at U.S. Bank
Wealth Management in Minneapolis.
    "We're now just on the edge of seeing some of the negative
impact from the sequestration (federal budget cuts) and we'll
see more of that potential impact this month," he said. "We
don't think sequestration creates a huge headwind, but it
nonetheless is a headwind."
    The benchmark 10-year Treasury note was trading
3/32 higher in price to yield 1.688 percent, just above
Wednesday's intraday low of 1.673 percent, the lowest in over
four months.
    Ten-year notes "are still bouncing around 1.69 (percent),
1.70 (percent), which is a resistance level," said Matt Duch, a
portfolio manager at Calvert Investments in Bethesda, Maryland.
    Though investors have some "sticker shock" at holding
Treasuries for long at these prices, he said, yields could move
even lower if 10-years continue to close below 1.70 percent.
    The 30-year bond rose 8/32 to yield 2.865
percent, compared with 2.88 percent late on Wednesday.
    Prices also found support from the Federal Reserve's
purchase of $3.38 billion of Treasuries maturing between May
2020 and February 2023 as part of its quantitative easing
monetary stimulus program aimed at fostering economic growth and
cutting unemployment. 
    The Treasury auctioned $18 billion of 5-year Treasury
Inflation-Protected Securities (TIPS) on Thursday at a high
yield of negative 1.311 percent, as well, an original issue
auction scheduled to be reopened in August and again in
December. 
    But the auction overall was weak, analysts said, with
investors reluctant.
    "That was a very rich part of the TIPS curve. It never
cheapened," said Chris McReynolds, head of U.S. Treasury trading
at Barclays in New York.
    Between soft economic data and a recent selloff in
commodities, he said, "it's definitely made people less worried
about inflation."
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