February 8, 2013 / 4:25 PM / 4 years ago

TREASURIES-Prices fall as stocks gain and before new supply

3 Min Read

* Prices fall as stocks jump on stronger economic data
    * Volumes seen dropping as U.S. East Coast prepares for
    * Treasury to sell $72 bln in new 3, 10 and 30-year bonds
    * Fed buys $1.37 billion in TIPS due 2029-2042

    By Karen Brettell
    NEW YORK, Feb 8 (Reuters) - U.S. Treasuries fell on Friday,
erasing some of Thursday's gains, after stocks jumped and as
investors prepared for $72 billion in new supply next week.
    The Treasury will sell $32 billion in three-year notes on
Tuesday, $24 billion in 10-year notes on Wednesday and $16
billion in 30-year bonds on Thursday.
    A stronger-than-expected reduction in the trade deficit on
Friday was also seen helping riskier stocks to gain, reducing
demand for safe-haven bonds.
    "We're just following stocks at this point," said Rick
Klingman, a Treasuries trader at BNP Paribas in New York. "The
trade deficit number implies that there is going to be a decent
upward revision in GDP, so I think that helps with the stocks."
    A rise in exports and lower imports of oil helped push the
U.S. trade deficit to its narrowest point in nearly three years
in December, data showed on Friday. 
    Benchmark 10-year Treasuries fell 4/32 in price
to yield 1.98 percent, up from 1.96 percent late on Thursday.
    The note's yield was as low as 1.93 percent on Thursday
after comments from European Central Bank President Mario Draghi
raised speculation that the bank would cut interest rates to
stem the region's strengthening currency. 
    Ten-year Treasuries are now trading in the middle of what
traders see as a range between around 1.90 percent and 2.04
    "We think we are going to trade in this range for the next
few weeks," said Mary Beth Fisher, head of U.S. interest rate
strategy at Societe Generale in New York. "It's going to take
materially better data to get us above 2.04 percent. It seems to
be a range where there is a lot of price support."
    A dramatic selloff in late January and early February pushed
the 10-year notes to more than eight-month highs of 2.06 percent
on Feb. 4. The notes have failed to hold above the 2.04 percent
level for very long, however. 
    Trading volumes are expected to taper off on Friday as
residents on the U.S. East Coast prepared for a large snowstorm
in the region.
    The Federal Reserve bought $1.37 billion in Treasury
Inflation-Protected Securities (TIPS) due between 2029 and 2042
on Friday as part of its ongoing bond purchase program.

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