TREASURIES-Prices rise on safety buying as Ukraine tensions rise

Tue Apr 15, 2014 11:21am EDT

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(Recasts with Ukraine, adds quote, details)
    * Prices gain as Ukraine tensions spark safety buying
    * NY manufacturing disappoints, inflation data benign
    * Fed buys $2.20 bln notes due 2020, 2021

    By Karen Brettell
    NEW YORK, April 15 (Reuters) - U.S. Treasuries prices gained
on Tuesday as rising tensions in Ukraine sparked a safety bid
for U.S. bonds, and after a weak manufacturing survey for New
York state pointed to sluggish economic momentum.
    Russia declared Ukraine on the brink of civil war on Tuesday
as Kiev said an "anti-terrorist operation" against pro-Moscow
separatists was under way, with troops and armored personnel
carriers seen near a flashpoint eastern town. 
    Concerns over escalating conflict added to bond purchases,
after a gauge of manufacturing in New York state earlier grew at
a slower rate than the previous month, and below expectations in
April. 
    "It added to the Treasuries rally in the long-end, emerging
markets overall are getting hit harder," said Michael Chang, an
interest rate strategist at Credit Suisse in New York.
    Benchmark 10-year notes were up 6/32 in price to
yield 2.63 percent, down from 2.66 percent earlier on Tuesday.
    Thirty-year bonds gained 14/32 in price to yield
3.47 percent, down from 3.50 percent earlier.
    Shorter-dated Treasuries yields briefly rose earlier on
Tuesday after the Labor Department also said on Tuesday its
Consumer Price Index increased 0.2 percent last month as a rise
in food and shelter costs offset a decline in gasoline prices.
The CPI index had gained 0.1 percent in February. 
    The data comes as the Treasury is due on Thursday to sell
$18 billion in five-year Treasury inflation-protected securities
(TIPS).
    U.S. inflation-linked bonds have been among the worst
performers since the Fed last year indicated that it would begin
tapering its bond purchases, with investors worrying over what
catalyst will lead inflation higher.
    Investors are focused on a busy week of data releases for
signs on the strength of the economy as the Federal Reserve
pares its bond purchases, and look toward interest rate hikes
that most expect to begin next year.
    Housing data on Wednesday will be evaluated to see if
activity picked up, after months of subdued data that many blame
on bad weather.
    "When the clouds part if we don't get a lift to housing that
could be a big issue," said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York. 
    A Philadelphia manufacturing survey released on Thursday
will also be a focus after Tuesday's weak New York report.
    Fed Chair Janet Yellen will also speak on Wednesday about
the economy. She spoke on Tuesday about markets regulation, but
did not discuss monetary policy.
    The Fed bought $2.20 billion in notes due 2020 and 2021 on
Tuesday as part of its ongoing purchase program.

 (Editing by Andrew Hay)
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