January 30, 2013 / 9:06 PM / 4 years ago

TREASURIES-Prices little changed as Fed sees moderate growth

3 Min Read

* Fed says unemployment to decline under appropriate policy
    * U.S. GDP shows unexpected contraction in fourth quarter
    * Treasury sells $29 billion of 7-year notes

    By Chris Reese
    NEW YORK, Jan 30 (Reuters) - U.S. Treasury debt prices
traded little changed on Wednesday after the Federal Reserve
said economic growth will proceed at a moderate pace and
unemployment will gradually decline under appropriate monetary
policy.
    The central bank also reiterated in a statement following
its two-day policy meeting it will continue its current economic
stimulus programs, buying mortgage and U.S. government debt,
until the labor market improves "substantially." 
    "The statement came out pretty much not only as I expected,
but as the market expected. No change in timing of the bond
purchases; that's probably what most people are looking for. The
market reacted in a way that said the Fed delivered what was
expected - little movement," said Fred Dickson, chief market
strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
    Treasuries began the day trading lower as investors pushed
for price concessions amid auctions of $99 billion of U.S.
government debt this week.
    Prices of U.S. government debt briefly moved higher after
data showing a surprise contraction in gross domestic product in
the world's biggest economy in the fourth quarter. Prices
returned to negative territory however as analysts pointed to
some positive signs for economic growth in the components of the
report, like rising consumer spending. 
    "At the end of the day, slow growth matters if it means job
hiring is slowing, and it does not look like job hiring is
slowing," said Chris Rupkey, chief financial economist at Bank
of Tokyo-Mitsubishi UFJ in New York.  
    Investors are now waiting for a key indicator of the health
of the labor market in January non-farm payrolls data on Friday.
    Analysts polled by Reuters expect U.S. employers added
160,000 new jobs this month, up marginally from 155,000 new
positions added in December. The unemployment rate is expected
to be unchanged from December at 7.8 percent.
    The Treasury on Thursday sold $29 billion of seven-year
notes, after having sold $35 billion of two-year notes on Monday
and $35 billion of five-year notes on Tuesday. Investors
typically try to push Treasuries prices down around the time of
such auctions.
    Benchmark 10-year notes on Wednesday traded 1/32
lower in price with the yield little changed from late Tuesday
at 2.00 percent. The yield reached as high as 2.04 percent on
Wednesday.
    Yields on benchmark notes have been testing the 2 percent
level since Monday, breaching that figure for the first time
since April.

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