TREASURIES-U.S. bond prices rise on global stock selloff

Thu Jun 13, 2013 10:32am EDT

Related Topics

* Global stock selloff stokes safe-haven bids for bonds
    * Upbeat U.S. economic data keep lid on bond gains
    * Thirty-year supply set to fetch highest yield in 15 months
    * Fed to buy $2.75 bln to $3.50 bln in Treasuries


    By Richard Leong
    NEW YORK, June 13 (Reuters) - U.S. Treasury debt prices rose
on Thursday as a global stock market selloff spurred safe-haven
demand for bonds, although gains were limited by encouraging
U.S. data that supported the view the Federal Reserve might
start to pare its bond purchases.
    Renewed appetite for Treasuries will likely bolster bidding
at a $13 billion auction of 30-year bonds at 1 p.m. (1700 GMT),
part of this week's $66 billion in coupon-bearing government
debt supply, analysts said.
    Investors scooped up Treasuries, Japanese yen, and other
perceived low-risk investments as they unloaded stocks, risky
bonds and other growth-oriented assets on jitters about how soon
the Fed might dial back its bond purchase program, worth $85
billion a month, known as Quantitative Easing 3, or QE3.
    The Bank of Japan's refrained earlier this week from
embarking on further stimulus, which added to traders' anxiety
over central banks' support to aid their economies.
    "A lot of the Fed tapering talk has been priced in. The
market was oversold. Now you have the Japan fears," said Ellis
Phifer, senior market analyst at Raymond James in Memphis,
Tennessee.
    Overnight, Tokyo's Nikkei stock index fell over 6
percent to a 10-week low, and has lost nearly 22 percent since a
multi-year high on May 23, entering bear market territory. The
yen rose 2 percent against the dollar to its strongest
level since the Bank of Japan surprised markets with its
aggressive $1.4 trillion stimulus program on April 4.
 
    Wall Street stocks were little changed in early trading
after opening lower, with the Standard & Poor's 500 index 
down 0.02 percent. 
    In the bond market, benchmark 10-year Treasury notes
 were up 8/32 in price, yielding 2.201 percent, down
2.7 basis points from late on Wednesday. The 10-year yield
touched a 14-month high of 2.293 percent two days ago.
    The 30-year bond rose 27/32 with its yield
falling to 3.325 percent from 3.372 percent late on Wednesday.
The 30-year yield was 11 basis points below 3.433 percent set on
 Tuesday, which was its highest level in 14 months.
    Treasuries prices briefly retreated from their initial highs
after a steeper-than-expected drop in weekly jobless claims and
surprisingly strong increase in May retail sales. The reports
supported the view the U.S. central bank might trim its bond
purchases as early as September.  
    "These data were strong and confirmed the Fed has the leeway
to signal it's ready to pull out," said Robbert Van Batenburg,
director of market strategy at Newedge USA LLC in New York.
    
    
    30-YEAR BOND SALE    
    This week's auction results have been mixed as some
investors stayed on the sidelines and were not enticed by
Treasury yields at their highest level in more than a year.
    They remained nervous on whether Fed policymakers might
scale back $45 billion monthly purchases of Treasuries and $40
billion in mortgage-backed securities, even though domestic
unemployment has not fallen as quickly as they would like and
core inflation has been below the Fed's 2 percent target.
    The bid-to-cover ratios, which measure the amount of bids
submitted to the amount of debt offered were weak at two debt
auctions  This gauge of buying interest at Tuesday's $32 billion
three-year note sale came in at its lowest level in 2-1/2 years,
while the bid-to-cover at Wednesday's $21 billion 10-year debt
auction turned out to be its lowest in 10 months.
  
    In the "when-issued" sector, traders expected the reopened
30-year bond issue due in May 2043 to sell at a yield of 3.334
percent, which was on track to be the highest
yield at a 30-year auction since March 2012.
    The Treasury originally sold $16 billion worth of this bond
issue at a yield of 2.980 percent in May.
    As the Treasury looked to complete this week's debt sales, 
the Fed planned to buy $2.75 billion to $3.50 billion in
government debt whose maturities range from August 2020 through
May 2023 at 11 a.m. (1500 GMT).
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