TREASURIES-Prices dip in light trade before Bernanke speaks

Fri Jan 3, 2014 11:04am EST

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* Prices slip, Fed minutes next Wednesday in focus
    * Bernanke to speak on Friday, no surprises seen
    * Volumes light on U.S. storm, Japan closed for holiday

    By Karen Brettell
    NEW YORK, Jan 3 (Reuters) - U.S. Treasuries prices fell on
Friday, sending benchmark 10-year yields back over 3 percent,
before Federal Reserve Chairman Ben Bernanke was due to speak at
an economics conference.
    Volumes were light as a winter storm kept many traders on
the U.S. East Coast away from their desks, and after the
Japanese market was closed.
    Bernanke will speak along with a number of other Fed
members, though analysts see it unlikely that the outgoing
Chairman will provide much fresh insight into Fed policy.
    The Fed's meeting minutes for December, slated for release
next Wednesday, will next take focus for signs over how far the
Fed may further pare back its bond purchases.
     The U.S. central bank said last month it would cut its
mortgage-backed securities and Treasuries purchases by $10
billion to $75 billion a month.
    The meeting minutes, new corporate supply and traders
adjusting to the Fed's smaller purchase schedule when it begins
purchases again next week are likely to keep investors on the
sidelines on Friday, said Jim Vogel, an interest rate strategist
at FTN Financial in Memphis, Tennessee.
    "There's no need to rush in right now," he said.
    Some traders see Treasuries as likely to become more
volatile as investors adjust to the change in leadership at the
Fed, and to the reduction in the bond purchase program.
    The U.S. Senate has set a Monday vote on President Barack
Obama's choice of Janet Yellen to chair the Federal Reserve and
replace Bernanke. 
    "In 2014 you should see a lot more curve volatility, rate
volatility," said Scott Graham, head of U.S. government bond
trading at BMO Capital Markets in Chicago.
    New supply next week may also send yields higher, he said.
The Treasury will sell $64 billion next week in new 3-, 10- and
30-year bonds.
    Benchmark 10-year notes were last down 2/32 in
price to yield 3.000 percent, up from 2.985 percent late on
Thursday. The yields have fallen from a two-and-a-half-year high
of 3.04 percent on Thursday.
    The Fed will buy $40 billion in Treasuries in January, down
from $45 billion in December. The first purchase will be of
between $1 billion and $1.50 billion in bonds due 2036 and 2043
on Monday.
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