February 28, 2014 / 8:56 PM / 3 years ago

TREASURIES-Prices pare losses on month-end buying

2 Min Read

* Strong euro zone CPI, Chicago PMI data pull on prices

* Revised U.S. 4th-quarter GDP growth caps bond losses

* Fed bought $1.25 bln in notes maturing in 2038-2043

By Marina Lopes

NEW YORK, Feb 28 (Reuters) - U.S. Treasury debt prices pared most of their losses on month-end buying on Friday, as investors balanced their portfolios, traders said.

Prices had fallen earlier in the session as stronger-than-expected economic data led to profit-taking.

A report on Friday showed the pace of business activity in the U.S. Midwest rose slightly in February, beating expectations and snapping a three-month run of slower growth.

Separately, data showed inflation in the euro zone unexpectedly held steady this month, cooling expectations the European Central Bank might ease monetary policy as early as next week, further pressuring Treasuries.

"The month-end extension is fairly large for Treasuries this month. Given the performance you've seen in the equity markets hitting new highs, my guess is that the balanced funds need to take profits in stocks and buy some Treasuries," said Sean Murphy, a Treasuries trader at Societe Generale in New York.

A big downward revision of the U.S. government's estimate of fourth-quarter growth, due to weak consumer spending and exports, also limited losses.

Benchmark 10-year note yields rose to a session high of 2.6980 and the market was on track for its biggest weekly loss in over one month.

Ten-year notes were down 5/32 in price, sending yields up to 2.660 percent, from Thursday's close of 2.642. Thirty-year bonds were down 2/32, pulling yields up to 3.598 percent from Thursday's close of 3.596 percent.

Traders predict yields will remain bound in the 2.65 percent to 2.76 percent range as investors wait for the payrolls report for February.

The Fed bought $1.25 billion in treasury notes maturing between 2038 and 2043.

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