LONDON Jan 18 U.S. bond prices rose on Friday,
with concerns over the debate about raising the nation's debt
ceiling prompting investors to snap up the paper cheapened by
this week's forecast-beating economic data.
* Housing starts grew at their fastest pace in over four
years in December, while the number of Americans filing new
claims for unemployment benefits in the past week fell to a
five-year low, data showed on Thursday.
* Slightly better-than-expected Chinese economic growth data
also weighed on Treasuries in Asian trade, pushing 10-year
yields to within a whisker of 1.90 percent.
* That level, roughly the middle of the trading range seen
for the most part of this year, lured buyers in European trade.
The risk that the United States might default if it does not
raise its borrowing limit in the next few weeks is likely to
ensure buyers will come back to the market at any dip in price,
* Yields on some U.S. debt maturing in February were up by
as much as 20 basis points on the day, although trading was
volatile. Investors see the U.S. debt ceiling as a temporary
problem, however, trusting the world's biggest economy will pay
back longer-dated debt and still regarding its large and liquid
debt market as one of the safest places for investors to park
* T-note yields were last 2 basis points lower
at 1.8644 percent, while T-note futures were 3/32 higher
* "We had a very upbeat day yesterday and to a certain
extent we now see markets taking a step back and reality sinking
in again," Rabobank strategist Philip Marey said.
"The underlying story is that the U.S. is recovering and the
recovery is gaining in strength ... but the fiscal policy
uncertainty is holding it back at the moment. There are two
opposing forces at the moment."
* Markets were expecting the University of Michigan index on
consumer sentiment to fit in with the recent trend of stronger
data. But Marey said any rise in yields after its release is
likely to be temporary as worries about the debt ceiling linger.
* Data firm Markit said the cost to insure U.S. debt against
default as shown by five-year credit default swaps was 1 basis
point higher on the day at 44 bps. That meant it cost 44,000
euros annually to buy 10 million euros of protection against a
U.S. default using a five-year CDS contract.