TREASURIES-Prices gain as week of massive supply nears end

Thu Sep 12, 2013 11:19am EDT

Related Topics

* Prices gain after Verizon's record bond, supply nears
completion
    * Weak euro zone factory output adds to bond bid
    * Treasury to sell $13 billion in 30-year bonds
    * Fed buys $3.36 bln notes due 2021-23

    By Karen Brettell
    NEW YORK, Sept 12 (Reuters) - U.S. Treasury debt prices rose
on Thursday as investors recovered from a mammoth week full of
new corporate and government bond supply, before the Treasury
sells $13 billion in 30-year bonds, the final sale of $65
billion in new U.S. debt this week.
    Treasuries have come under pressure since last Friday as
investors prepared for a huge week of sales that included a
record-breaking corporate bond deal by Verizon Communications
Inc on Wednesday. Verizon sold $49 billion worth of
bonds, eclipsing the previous investment-grade record of $17
billion by Apple Inc in April, according to IFR, a
Thomson Reuters service.
    The completion of that sale has now allowed investors to
come back to Treasuries as well as to unwind hedges entered
before the sale.
    "The market had built in a huge concession for supply, and
now the supply is eliminated and the areas that were beat up the
most will recover the most," said Tom Tucci, head of Treasuries
trading at CIBC, noting that 10-year notes and 30-year bonds had
taken the brunt of the selling.
    U.S. benchmark 10-year Treasury notes were last
up 10/32 in price to yield 2.89 percent, down from 2.91 percent
late on Wednesday. They have fallen from a two-year high of 3.01
percent on Friday.
    Thirty-year bonds rose 17/32 in price to yield
3.83 percent, down from 3.85 percent on Wednesday.
    A drop in euro zone factory output also raised new fears
over global growth on Thursday, hurting shares and adding demand
for U.S. bonds. 
    Treasuries temporarily pared price gains on Thursday after
data showed that the number of U.S. jobless claims fell sharply
last week, though much of the decline appeared due to technical
problems in claims processing. 
    Demand was strong for the Treasury's $21 billion 10-year
note reopening on Wednesday, helped by hedge unwinds from the
Verizon sale.
    Demand for 30-year bonds will now be tested, with many
investors nervous about entering new positions ahead of the
highly anticipated Federal Reserve meeting next week, where the
U.S. central bank is expected to announce a reduction in its $85
billion-per-month bond purchase program.
    "The market's trading well and we're through the big Verizon
deal, so it feels like today should go OK," said Justin Lederer,
an interest rate strategist at Cantor Fitzgerald in New York.
But "with the tapering talk there could be some people just
waiting to see what the number is, if there's a number."
    The Fed is expected to taper bond buying despite a
weaker-than-expected employment report last Friday, which
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, less than
the $15 billion median reduction in Friday's primary dealer poll
and a wider poll in August. 
    The Fed will buy $3.36 billion in notes due 2021 to 2023 on
Thursday as part of its ongoing purchase program.
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