* Strong U.S. new home sales data puts pressure on yields
* Demand high in five-year-note auction
* Fed buys $1.25 billion in treasuries maturing 2038 to 2043
By Marina Lopes
NEW YORK, Feb 26 U.S. Treasury debt prices
inched up on Wednesday after the release of better-than-expected
data on new home sales and following strong demand for a sale of
U.S. single-family home sales surged to a 5-1/2-year high in
January, surprising analysts after data last week showed housing
starts fell by the most in nearly three years due to severe
Demand was strong for a five-year note auction, with
indirect bidders dominating and prices rising almost one basis
point throughout the auction, traders said. The Treasury sold
$35 billion in five-year notes at a high yield of 1.53 percent.
The broader bond market rallied into the auction and added to
those gains after the sale.
"We have seen a reasonable bid emerge despite the
stronger-than-expected new home sales report and a bid for the
equity market, which we typically would expect to create a bit
of selling in Treasuries," said Ian Lyngen, a senior government
bond strategist at CRT Capital.
Ten-year notes were up 7/32 in price, sending
yields down to 2.687 percent. Thirty-year yields
were up 4/32 in price, pushing yields down to 3.649 percent from
Tuesday's close of 3.661 percent.
The U.S. government bond market enjoyed a brief safe-haven
rally after Russian President Vladimir Putin put combat troops
on high alert for war games near Ukraine, following the toppling
of Russian ally Viktor Yanukovich as president, traders said.
Benchmark 10-year note yields have held in 2.65 to 2.78
percent range for two weeks and traders see the debt as unlikely
to move out of it until there is fresh information about the
health of the U.S. economy.
The Fed bought $1.25 billion in Treasuries maturing between
2038 and 2043 as part of its continuing bond-buying program.
Volumes were low overnight, but investors closely monitored
moves in China's yuan, which has shed more than 1.5 percent
since mid January, as the central bank has urged state-owned
banks to sell the currency.