* Strong demand at auction of $13 bln in 30-year bonds
* Europe remains in focus, better U.S. data shrugged of
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 13 U.S. Treasury debt prices rose
on Thursday, with 30-year bonds snapping six days of losses, as
a rally in stocks lost momentum after soft earnings from J.P.
Morgan and concerns about Europe's plan to recapitalize its
An auction of U.S. 30-year bonds attracted strong interest,
with a record low yield of 3.120 percent compared with market
forecasts of 3.157 percent. That propelled 30-year bond prices
even higher and pushed yields to session lows.
The bid-to-cover ratio, which gauges demand by comparing
total bids with the amount offered, was 2.94 times, above the
Many had expected robust demand at the auction anyway given
how much 30-year bonds have cheapened in recent sessions. And
for some, the Federal Reserve's buying of long bonds suggested
that these securities offered good value.
Overall, most analysts have pinned Thursday's gains in the
Treasury market on the slide in stocks and any caution that has
resurfaced could be short-lived.
"What we're seeing is a classic bond market response to
modest equity market weakness," said Jonathan Lewis, chief
investment officer, at Samson Capital Advisors in New York,
with assets under management of $7.7 billion.
"This is a stocks down, bonds up trade, with no material
economic catalyst other than we had several days of stocks
run-up and bonds sell-off."
Headlines in Europe, however, continued to attract
attention, with the latest one suggesting euro zone banks would
be given about six months to strengthen their capital under
what could be hefty recapitalization schemes.
On balance, though, most investors still believe the
European crisis is under control and measures are being taken
to avert another credit crunch.
Volume in the Treasury market was $178.486 billion after 12
pm Eastern time, about 15 percent higher than the 20-day moving
average for that time of $155.535 billion, ICAP said.
The Treasury market, meanwhile, shrugged off a weekly
jobless claims report that many saw as a faintly positive sign
for the economy, which would normally spur selling in
New U.S. claims for unemployment benefits edged down last
week, according to a government report on Thursday that pointed
to a modest improvement in the labor market at the start of the
In early afternoon trading, the 30-year bond
rose 1-15/32 higher in price, yielding 3.12 percent, down seven
basis points from 3.19 percent at Wednesday's close.
Market attention has now shifted to nearby resistance at
3.20 percent, analysts said, corresponding to a series of lows
in price that formed between September 6-16.
RBC Capital Market's chief technical strategist George
Davis said a daily close above 3.20 would sustain the
corrective forces at hand, exposing the 38.2 percent Fibonacci
retracement of the July-October decline in yields at 3.35.
However, the Federal Reserve's latest program to lower
long-term interest rates, which the market has dubbed Operation
Twist, could provide some support for 30-year bond prices.
The Fed has pledged to purchase a hefty portion of 30-year
bonds over the coming months, reducing supply in the Treasury
market. This could increase the bonds' appeal at auction.
The benchmark 10-year Treasury note , meanwhile,
was up 15/32 in price and was last yielding 2.15 percent, down
6 basis points from Wednesday.