CORRECTED-TREASURIES-Yields rise as China data improves, Syria fears ebb
(Corrects size of three-year note sale in bullet point to $31 bln, not $13 bln) * Yields rise back to near two-year highs * Chinese data, easing Syria concerns reduce bond demand * Treasury to sell $31 bln in new three-year notes * Fed buys $1.39 bln TIPS due 2018-2043 By Karen Brettell NEW YORK, Sept 10 (Reuters) - U.S. Treasuries yields rose on Tuesday as upbeat Chinese industrial output and retail sales data eased fears over an economic slowdown, while ebbing concerns about a Western-led attack on Syria also reduced demand for safe-haven U.S. debt. Stronger-than-expected industrial output reinforced other signs that China's economy was stabilizing after slowing for more than two years, just as major emerging markets brace for potential fallout from an expected trimming of U.S. stimulus. Concerns about repercussions of a Western-led attack on Syria also decreased after U.S. President Barack Obama said Monday he saw a possible breakthrough after Russia proposed that its ally Damascus hand over its chemical weapons for destruction, which could avert the planned military strikes. "We're seeing some modest selling on not a lot of volume. It's related mainly to the better Chinese data and a press story that Syria seems to have agreed to Russia's proposal on chemical weapons. Those two things combined have led to less risk of an economic slowdown," said Ira Jersey, an interest rate strategist at Credit Suisse in New York. Benchmark 10-year notes were last down 10/32 in price to yield 2.96 percent, up from 2.91 percent late Monday. Treasuries are likely to continue to be sensitive to the risk of conflict with Syria, which could add volatility to the market as the Treasury prepares to sell $65 billion in new debt this week. "We're still a little bit day to day and we've got more people trying to work out if the Syrian, Russian and U.S. negotiations can really bear fruit," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. The Treasury will auction $31 billion in three-year notes on Tuesday at 1:00 p.m. EDT (1700 GMT). In "when-issued" activity, traders expected the upcoming three-year offering due September 2015 to sell at a yield of 0.92 percent, three basis points above where the notes were trading in the secondary market. Hedging by dealers and investors preparing for a record-breaking corporate bond deal by Verizon was also seen adding to pressure on Treasuries. The company is on track to sell the largest deal in history, with order books already surpassing $50 billion. Pricing is expected on Wednesday, according to IFR, a unit of Thomson Reuters. The Federal Reserve's policy meeting next week will be the next focus of the market, once it works through this week's supply. Ten-year note yields dropped from two-year highs of 3.01 percent on Friday, after a weaker-than-expected payrolls report led investors to believe that the Federal Reserve may cut its bond purchase program by less than previously anticipated, if at all, when it meets. Friday's payrolls report showed employers added fewer jobs than expected in August, while jobs gains for June and July were revised downward. Economists told Reuters after the latest jobs report they now expect the Fed to begin paring its purchases of Treasuries and mortgage-backed securities by $10 billion a month, down from the $15 billion median in Friday's primary dealer poll and a wider poll conducted in August. The Fed bought $1.39 billion in Treasury Inflation-Protected Securities (TIPS) due from 2018 to 2043 on Tuesday as part of its ongoing purchase program. Economic data later in the week will be closely watched for signs of strength in the economy, with retail sales data due out Friday likely to be the most influential. (Editing by Bernadette Baum)
- Insight: How U.S. spying cost Boeing multibillion-dollar jet contract
- Exclusive: Secret contract tied NSA and security industry pioneer |
- With Fed out of the way, what's next on Wall Street?
- Insight: For Chinese farmers, a rare welcome in Russia's Far East
- Millions of Target shoppers face new debit card limits |