April 24, 2013 / 1:56 PM / in 4 years

TREASURIES-Bond prices flat as weak data offsets supply

4 Min Read

* U.S. durables goods post biggest fall since August
    * U.S. Treasury to sell $35 billion 5-year note supply
    * Hopes for new Italy government spur early bond sales
    * No lingering effect after Tuesday's tweet-linked rally

    By Richard Leong
    NEW YORK, April 24 (Reuters) - U.S. government debt prices
were little changed on Wednesday as disappointing data on
durable goods supported safe-haven demand for bonds and offset
selling pressure from investors making room for this week's $99
billion coupon-bearing supply.
    A government report that showed domestic durable goods
orders falling 5.7 percent in March - the biggest drop since
August - follows a recent spate of weaker-than-expected data
that has fueled worries of a spring U.S. slowdown for a third
straight year. 
    News that Italian President Giorgio Napolitano had picked
center-left duty leader Enrico Letta as the new premier and had
asked him to form a new government pressured U.S. bond prices
downward and briefly lifted benchmark yields from their highest
levels of the year set on Tuesday. 
    The move stoked hopes that national leaders would turn their
focus toward solving the fiscal problems that have bogged down
Italy, the euro zone's third-biggest economy, but doubts
persisted over whether Letta could cobble together a broad-based
coalition for a confidence vote by next week. 
    "There are changes coming in Italy, but they're painfully
slow," said Stan Shipley, bond strategist at the ISI Group in
New York.
    Benchmark 10-year Treasury notes were unchanged
in price at 102-20/32 to yield 1.706 percent.
    The 10-year yield was about 6 basis points above a
four-month plus low of 1.643 percent set on Tuesday after a
false tweet from the Associated Press about explosions at the
White House, which briefly sent stock prices plunging and bond
prices soaring. 
    There was little evidence of the tweet-related sell-off in
Wednesday's trading. "Today it's not an issue," Shipley said.
    Uncertainties over the formation of an Italian government
and the discouraging U.S. durable goods report, however, were
not enough to snuff out investors' interest in stocks, which
limited a rise in Treasuries prices, analysts said.
    This week's Treasuries supply has also capped any sustained
upward move in bond prices.
    The U.S. Treasury Department will sell $35 billion in new
five-year notes Wednesday, following average results at a
two-year note sale on Tuesday. It will complete this week's debt
offerings with a $29 billion seven-year debt auction
 on Thursday.
    In the "when-issued" sector, traders expected the upcoming
five-year note issue due in April 2018 to sell at
a yield of 0.717 percent, lower than the 0.760 percent yield at
the five-year auction in March.
    The Federal Reserve will buy $1.25 billion to $1.75 billion
in government debt at 11:00 a.m. EDT (1500 GMT) that will come
due in February 2036 to February 2043. The operation is the
latest of the central bank's program intended to hold down
interest rates in an effort to support the economic recovery.

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