TREASURIES-Prices steady before housing data, auctions

Wed Feb 26, 2014 9:53am EST

Related Topics

* Chinese yuan stabilizes after sharp price falls, capping bond buying

* Weather-impacted data continues to sideline investors

* Fed to buy $1 bln to $1.25 bln in debt maturing between 2036 and 2044

By Marina Lopes

NEW YORK, Feb 26 (Reuters) - U.S. Treasury debt prices were steady on Wednesday as China's yuan stabilized after sharp falls on Tuesday, and as investors were hesitant to enter new trades while they looked for clarity on the state of the economy after a spate of weakening data.

Volumes were low overnight, but investors closely monitored China's yuan, which has shed more than 1.5 percent since mid January, as the central bank urges state-owned banks to sell its currency.

A stable yuan has reduced volatility in the Chinese unit and diminished the impact on such currencies as the Australian dollar. That has capped buying in the U.S. bond market.

Severe winter weather that continues to impact this month's economic data has kept the market range-bound as investors analyze whether recent weakness is temporary.

Benchmark 10-year note yields have held between 2.65 percent and 2.78 percent for the past two weeks and traders see the debt as unlikely to move out of that range until there is fresh information over the state of economic growth.

"We have to wait until we get more clarification on the data," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.

"The weather issue continues to be problematic, as such, we can't decipher how much data has been distorted and the market is hesitant to make moves on distorted data," she said.

Ten-year notes were unchanged in price to yield 2.703 percent. The 30-year bond rose 2/32 in price, bringing the yield down to 3.659 percent.

Traders await January new home sales data, as well as a two-year floating rate note auction and a five-year note auction, due later in the day.

"The (floating rate notes) will go well again, as it debuted last month and saw strong bidding, but the five-year auction is a bit more difficult. It is in a sweet spot in the curve, and we have seen a lot of action going through the five-year sector, but it hasn't seen a lot of real strong bidding as of late," said Rupert.

The Fed will buy between $1 billion and $1.25 billion in debt maturing between 2036 and 2044 as part of its continued stimulus program.

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