March 15, 2013 / 11:42 AM / in 4 years

TREASURIES-U.S. yields flat, struggle to break post-payroll high

LONDON, March 15 (Reuters) - U.S. Treasury yields were flat on Friday as a recent string of upbeat data from the world's largest economy was offset by lingering demand for safety against an uncertain global backdrop.

U.S. data has fueled optimism about the global economy, showing this week that the number of Americans filing new claims for unemployment benefits dropped last week while retail sales expanded at their fastest clip in five months in February.

Investor attention turns to inflation and manufacturing data this session. Despite increasing evidence of a recovery, 10-year yields have struggled to break above an 11-month high hit last Friday.

"On their own, Treasury yields would be higher, but it's not only about the U.S., it's about the global (picture)," one trader said, highlighting Italy's unresolved political stalemate and sluggish growth in other major economies.

"That's why we are being capped. No one wants to get short (put on selling positions) on 10-year bonds when they reach 2.06 - that has capped yields consistently."

Ten-year U.S. yields were flat at 2.04 percent.

They have traded above 2 percent since last Friday but have not retested the 2.087 percent high hit that day after a release showed U.S. employers added more workers to their payrolls than expected in February.

Five-year borrowing costs were steady at 0.88 percent and thirty-year yields were unchanged at 3.24 percent.

"The focus will be increasingly in the (Federal Reserve monetary policy) meeting next week," Nick Stamenkovic, strategist at RIA Capital Markets said.

The U.S. central bank looks set to keep buying $85 billion a month in mortgage and Treasury bonds in an effort to encourage investment and bolster a weak economic recovery. It issues a statement on Wednesday at the end of its two-day meeting.

"If they acknowledge the labor market is strengthening ... then the market might retest the 2.05 (percent) level which it has held recently," Stamenkovic said.

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