January 14, 2014 / 5:00 PM / 4 years ago

TREASURIES-Prices fall as retail sales strong, Fed completes buyback

3 Min Read

* Prices dip as retail sales data point to stronger U.S.
    * Two-day price rally pauses after short-covering
    * Fed buys $1.39 bln bonds due 2038-23

    By Karen Brettell
    NEW YORK, Jan 14 (Reuters) - U.S. Treasury debt prices fell
on Tuesday after a gauge of U.S. consumer spending rose more
than expected in December, suggesting the economy gathered steam
at the end of last year and was poised for stronger growth in
    The Commerce Department said on Tuesday that U.S. retail
sales, excluding automobiles, gasoline, building materials and
food services, increased 0.7 percent last month after a 0.2
percent rise in November. 
    The data follows a report on Friday that showed a
weaker-than-expected jobs gain for December, which sent yields
lower as some investors reevaluated bullish expectations for
economic growth this year.
    "The data is better than expected, even though you had
downward revisions in the last month," said Charles Comiskey,
head of Treasuries trading at Bank of Nova Scotia in New York.
    The fall in Treasuries prices paused a two-day rally as
traders covered short positions set before the December payrolls
report, with those shorts now having being taken out, Comiskey
    Investors also raised their holdings of longer-dated
Treasuries after the jobs data, according to a survey released
on Tuesday by J.P. Morgan Securities.
    The share of investors who on Monday said their holdings of
longer-dated U.S. government debt were greater than their
holdings of portfolio benchmarks rose to 19 percent from 13
percent a week earlier, J.P. Morgan said. 
    Treasuries yields traded at session highs on Tuesday after
the Federal Reserve announced the purchase of $1.39 billion in
bonds due between 2038 and 2043, made as part of its ongoing
purchase program. 
    Benchmark U.S. 10-year Treasury notes were last
trading down 7/32 in price to yield 2.861 percent, up from 2.825
percent late Monday. They have fallen from a high of 2.967
percent on Friday before the jobs data was released.
    Thirty-year bonds fell 10/32 in price to yield
3.799 percent, up from 3.766 percent.
    The Fed will purchase between $4 billion and $5 billion in
notes due 2018 and 2019 on Wednesday.
    Philadelphia Fed President Charles Plosser and Dallas Fed
President Richard Fisher are both due to speak later on Tuesday.

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