TREASURIES-Strong home sales, supply, rate worries weigh
* September surge in sales of existing homes hurts prices
* Next week's coupon supply looms over the market
* Concern central banks could withdraw stimulus weighs (Adds comment, updates prices)
By Ellen Freilich
NEW YORK, Oct 23 (Reuters) - U.S. Treasury debt prices slipped on Friday after news that home sales surged last month and ahead of next week's record-large wave of government notes supply.
The National Association of Realtors said the sales of previously owned homes surged 9.4 percent in September to an annual rate of 5.57 million units, well above analysts' forecasts. [ID:nN2395552]
"This confirmed the improving trend in the housing market," said Gary Thayer, macrostrategist at Wells Fargo Advisors in St. Louis.
The surge in home resales was the best reading since July 2007 and the largest single-month rise on record, said analysts at RBS Securities in Greenwich, Connecticut.
A news article in the Financial Times highlighting discomfort among some Federal Reserve officials with official language that interest rates would remain low "for an extended period" also weighed on Treasuries prices.
"What the Fed is doing right now is laying the groundwork to gently break it to everybody that they are not going to be near zero forever ... and that just gets us one step closer to moving to higher interest rates," said James Caron, co-head of global rates research at Morgan Stanley in New York.
However, amid the discussion of possible changes in the Fed's policy language, few expect the U.S. central bank to hike rates any time soon.
"The Fed will lift rates toward the end of next year," said Tom Porcelli, U.S. market economist with RBC Capital Markets in New York. "Removal of accommodation will come when the core economic data, namely employment, improve."
In addition, traders were mindful of the four Treasury auctions that will dominate the market next week.
The Treasury will sell $123 billion in notes, a record large weekly issuance, and investors are fretting that massive waves of government debt to pay for rescuing financial companies and propping up the economy could eventually endanger the United States' top level credit rating.
"The market has tended to go down on the week of supply," Caron said.
Losses were limited, however, by weakness in the stock market, which propped up the safe-haven appeal of U.S. government debt. [.N]
Benchmark 10-year Treasury notes US10YT=RR fell 19/32 in price, the yield rising to 3.50 percent from 3.42 percent late on Thursday. Treasury yields move inversely to prices.
Shorter-dated Treasuries, which are more sensitive to interest rate expectations, also took a hit, with the two-year note US2YT=RR falling 4/32, its yield rising to 1.02 percent from 0.95 percent late on Thursday.
Thirty-year bonds US30YT=RR fell 26/32 in price, their yield rising to 4.29 percent from 4.25 percent late on Thursday, while five-year notes US5YT=RR fell 13/32, their yield rising to 2.45 percent from 2.36 percent. (Additional reporting by Chris Reese; Editing by Dan Grebler)
