TREASURIES-Yields rise on Chinese growth, rising stocks

Wed Apr 16, 2014 11:11am EDT

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(Adds quote, details, updates prices)
    * Prices fall as China growth beats expectations, stocks
rise
    * Industrial production strong, housing data disappoints
    * Yellen to speak, Fed beige book due later on Wednesday
    * Fed buys $1.02 bln bonds due 2036-2044

    By Karen Brettell
    NEW YORK, April 16 (Reuters) - U.S. Treasuries prices fell
on Wednesday as better-than-expected growth in China helped
boost riskier assets, including stocks, reducing demand for
safe-haven government bonds.
    China, the world's second-largest economy, grew 7.4 percent
in the January-March quarter from a year earlier, the National
Bureau of Statistics said on Wednesday. That was slightly
stronger than the median forecast of 7.3 percent in a Reuters
poll but still slower than 7.7 percent in the final quarter of
2013. 
    A rally in Yahoo shares also helped stocks rise for a third
straight session, even as U.S. data gave mixed messages over the
strength of the U.S. economy.
    "The bounce in the stocks as much as the data in China,"
reduced demand for Treasuries, said Lou Brien, a market
strategist at DRW Trading in Chicago.
    U.S. industrial production rose at a faster-than-expected
clip in March, the latest sign the economy was gaining momentum.
    Bonds briefly pared losses, however, after data showed that
groundbreaking for new homes also increased but remained well
below the post-recession peak hit in November, signaling the
drag the housing market is placing on the
economy. 
    "That momentarily took the air out of that move," said Jim
Vogel, an interest rate strategist at FTN Financial in Memphis,
Tennessee. "Of all the things the market is optimistic about for
a spring rebound, housing was the biggest question mark."
    Benchmark 10-year notes were last down 5/32 in
price to yield 2.65 percent, down from 2.67 percent earlier on
Wednesday. The yields fell to one-and-a-half month lows of 2.60
percent on Tuesday, as concerns about escalating tension in
Ukraine sparked safety buying and a weak New York manufacturing
survey raised fears over the strength of the U.S. recovery. 
    The mixed data comes as investors grapple with when the
Federal Reserve is likely to begin raising rates, which most see
as likely sometime next year.
    The Fed will release its Beige Book report later on
Wednesday, a collection of anecdotes from the central bank's
business contacts across the country.
    Several Fed speakers are also due to speak on Wednesday,
including Fed Chair Janet Yellen and Dallas Fed President
Richard Fisher.
    Atlanta Fed President Dennis Lockhart said on Wednesday that
the Fed should try to make its communications on the expected
path of interest rates and the economy consistent with its
policy statements. 
    The Fed bought $1.02 billion in bonds due from 2036 to 2044
on Wednesday as part of its ongoing purchase program.
    Data on Thursday, including a Philadelphia manufacturing
survey, will also be watched for further signals on the state of
the economy.
    Demand for inflation-linked debt will also be tested on
Thursday when Treasury sells $18 billion in five-year Treasury
inflation-protected securities, or TIPS.
    TIPS have been among the worst performing assets since the
Fed last year indicated it would begin paring its bond purchase
program, leading many to wonder what will spark inflation, which
continues to run below Fed targets of 2 percent.
    The bond market will close early on Thursday and be closed
all day on Friday for the Good Friday holiday.

 (Editing by Meredith Mazzilli and Jonathan Oatis)
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