TREASURIES-Yields edge lower as year-end approaches

Mon Dec 30, 2013 9:27am EST

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* Volumes thin as year-end approaches
    * Yield on 10-year Treasury note remains near 3 percent

    By Luciana Lopez
    NEW YORK, Dec 30 (Reuters) - Benchmark U.S. Treasury debt
yields slipped but held near highs for the year on Monday as
investors readied for less buying of bonds by the Federal
Reserve next year, with volumes light as the New Year's Day
holiday approaches.
    "Today is the day before the last trading day of the year.
That's really its claim to fame," said Ian Lyngen, senior
government bond strategist at CRT Capital in Stamford,
Connecticut.
    "Expectations for significant price action are muted," he
added, noting thinly-staffed trading desks.
    The pull back reversed some of the advance in yields after
the U.S. Federal Reserve earlier this month said it will scale
back its monthly purchases of Treasuries and mortgage-backed
securities by $10 billion to $75 billion in January as the
economy seems to be improving. 
    The 10-year Treasury note rose 6/32 in price on
Monday to yield 2.983 percent, from a yield of 3.006 percent
late on Friday.
    The 10-year yield, a benchmark for mortgages and other
long-term borrowing costs, touched 3.02 percent late last week,
the highest intraday level since July 2011, according to Reuters
data.
    The benchmark note yield has gained about 125 basis points
since the end of last year as the world's biggest economy has
regained some momentum. Equities have hit a series of record
highs as investors have turned away from safe-haven government
debt to scoop up riskier assets.
    The 30-year Treasury note rose 14/32 in price to
yield 3.919 percent, from a yield of 3.945 percent late on
Friday.
    Nevertheless, the Fed suggested last week that short-term
interest rates will stay near zero over the near term because of
a combination of a still-uncertain job market as well as benign
inflation pressures. 
    Those price pressures could become a major focus in the
coming year, said Jim Vogel, an interest rate strategist at FTN
Financial in Memphis, Tennessee.
    "Assuming economic growth improves next year as forecasted,
the story for bond investors will be the track of inflation,"
Vogel said.
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