TREASURIES-Prices pare gains before 10-year note sale

Wed Sep 11, 2013 11:22am EDT

Related Topics

* U.S. bond prices gain as stocks slip
    * Treasury to sell $21 bln in 10-year notes
    * Fed buys $1.50 bln bonds due 2038-2043
    * Unlocking of hedges for Verizon bond deal helps rally

    By Karen Brettell
    NEW YORK, Sept 11 (Reuters) - U.S. Treasuries prices rose on
Wednesday as stocks dipped, though gains were pared as investors
prepared for the Treasury to sell $21 billion in 10-year notes,
the second sale in $65 billion worth of new supply this week.
    Bond prices were up without new economic catalysts, with
yields holding in the recent range as many investors were
reluctant to enter into new positions ahead of a highly
anticipated Federal Reserve meeting next week.
    Uncertainty over whether the U.S. may enter conflict with
Syria also added to some investors' hesitance to trade.
    "We're all kind of in a waiting pattern for the Fed and
seeing how the Syria thing plays out," said Lou Brien, market
strategist at DRW Trading in Chicago.
    Benchmark 10-year notes were last up 2/32 in
price to yield 2.96 percent, down from 2.97 percent late on
Tuesday. They have fallen from a two-year high of 3.01 percent
on Friday.
    The unwinding of hedges set ahead of Verizon's
record-breaking corporate bond deal may have helped Treasuries
rally. Verizon launched a $49 billion sale on Wednesday,
eclipsing the previous investment grade record of $17 billion by
Apple in April, according to IFR, a Thomson Reuters service.
    Higher yields may help the Treasury sell $21 billion in a
10-year note reopening later on Wednesday, though nervousness
over the Fed meeting could also hurt demand. The benchmark
yields have increased from 1.60 percent at the beginning of May.
    "I think the higher yields will help international demand,
the caution is whether we get a weaker auction because the Fed
is coming out and nobody really wants to buy anything," said
Gennadiy Goldberg, an interest rate strategist at TD Securities
in New York.
    The Fed is expected to announce after its meeting that it
will reduce its $85 billion-a-month bond purchases, though a
weaker-than-expected employment report last Friday reduced
expectations of how large any cut will be.
    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 in August. 
    The Fed bought $1.50 billion in bonds due from 2038 to 2043
on Wednesday as part of its ongoing purchase program.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article