TREASURIES-U.S. bond prices rise before 10-year note supply
* U.S. to sell $24 billion 10-year notes after solid 3-year sale * Bank of England's dovish policy stand seen bond-friendly * Fed purchases $1.51 billion long-dated Treasuries * Fed's Pianalto, non-FOMC voter, to speak on economy By Richard Leong NEW YORK, Aug 7 (Reuters) - U.S. government debt prices rose on Wednesday with some traders anticipating firm demand at a $24 billion auction of 10-year notes, in the second-leg of this week's $72 billion quarterly refunding. The 10-year supply comes a day after solid bidding at a $32 billon sale of three-year debt, suggesting investor appetite for Treasuries despite lingering worries over whether the Federal Reserve might pare its $85 billion monthly bond purchases later this year, traders said. "Supply has been the biggest catalyst of the week. There may be some value at the long-end of the curve," said Mike Lorizio, head of Treasuries trading at Manulife Asset Management in Boston. The U.S. Treasury will use most of the proceeds from this week's debt sales to repay investors who hold maturing government securities. The federal government will only receive $2.4 billion in new cash from the debt sold. Another factor supporting bond prices was the Bank of England's commitment to keep its policy rates low, with the goal to knock domestic unemployment under 7 percent, which is comparable to the rhetoric coming from its U.S. counterpart. "In general, this is positive for the bond market because it keeps rates in check," said Mike Cullinane, head of Treasuries trading with Raymond James in St. Petersburg, Florida. Fed Chairman Ben Bernanke and other top central bank officials have said in recent weeks the timing of any reduction in bond purchases is not set in stone, adding the Fed will likely keep short-term interest rates near zero for a protracted period even after it stops buying bonds. This, in turn, has halted a bond market selloff that lifted benchmark yields to 2.755 percent, a 23-month high, in early July. Still, senior Fed officials have not damped down expectations the central bank is on track to shrink its purchases of Treasuries and mortgage-backed securities, the pillar of its third round of quantitative easing, or QE3, as early as its next policy meeting in September. Chicago Fed President Charles Evans, a current voter on the Fed's policy-setting group, was the latest central bank official who weighed in on the reduction of QE3. He said on Tuesday the Fed would probably reduce its bond buying later this year and it is "likely to wind down over time in a couple or few stages." Traders may receive another view on the future of QE3 when Cleveland Fed President Sandra Pianalto, who is not a voter on the Fed policy committee this year, speaks on the economy at 1:40 p.m. EDT (1740 GMT). On the open market, benchmark 10-year Treasury notes were up 6/32 in price with a yield of 2.620 percent, down 2.2 basis points from late on Tuesday. The 30-year bond was up 16/32 in price to yield 3.698 percent, down 3.1 basis points from Tuesday's close. In "when-issued" activities, traders expected the upcoming 10-year note issue that will mature in August 2023 to sell at a yield of 2.630 percent. This compared with the 2.670 percent yield at July's 10-year auction, which was highest in two years. The Fed conducted its second purchase of long-dated Treasuries this week. It bought $1.507 billion in bonds maturing in February 2036 through February 2043 after it bought $1.496 billon of these maturities on Monday. In other parts of the bond market, the yield spreads between the debt issued by U.S. mortgage finance agencies Fannie Mae and Freddie Mac were mostly little changed after Freddie posted its second largest ever quarterly profit. The yield premium on a Freddie five-year note issue due March 2018 over comparable five-year Treasuries was about 8 basis points, up slightly from late Tuesday, according to Reuters data.
- Air strike kills 15 civilians in Yemen by mistake: officials
- North Korea executes leader's powerful uncle in rare public purge |
- Insight: In Yemen, al Qaeda gains sympathy amid U.S. drone strikes
- Twitter backtracks on block feature after users revolt
- Iran angry over U.S. sanctions, nuclear talks interrupted