(Corrects Cullinane's firm to D.A. Davidson, paragraphs 2 and
* U.S. Fed on track to taper bond purchases next week-WSJ
* Some traders cite lower prices partly on mortgage hedging
* Fed to buy $1.0-$1.5 bln long-dated Treasuries
By Richard Leong
NEW YORK, Jan 21 U.S. Treasuries prices slipped
on Tuesday with benchmark yields edging up from five-week lows
on concerns about the Federal Reserve further paring its
bond-purchase monetary stimulus at its policy meeting next week.
Some traders attributed those worries stemming from an
article in The Wall Street Journal that said the U.S. central
bank will likely reduce its monthly purchases of Treasuries and
mortgage-backed securities by $10 billion to $65 billion.
"The view out there is there's going to be continued
tapering on a gradual basis. Another $10 billion in tapering is
a logical way to go," said Mike Cullinane, head of Treasuries
trading with D.A. Davidson in St. Petersburg, Florida.
Such a move followed the somewhat surprising decision from
the Fed to begin shrinking its third round of quantitative
easing (QE3) at its December policy meeting by reducing its bond
purchases in January by $10 billion from $85 billion.
Fed officials will hold their next monetary policy meeting
on Jan. 28-29.
"The Federal Reserve is on track to trim its bond-buying
program for the second time in six weeks as a lackluster
December jobs report failed to diminish the central bank's
expectations for solid U.S. economic growth this year," The Wall
Street Journal story published late Monday said, citing
interviews with officials and their public comments.
Some analysts downplayed the article in The Wall Street
Journal as a key factor exerting downward pressure on Treasuries
prices. They reckoned the modest decline on light volume and
hedging tied to mortgage holdings after a U.S. holiday weekend.
U.S. financial markets were closed on Monday in observance
of the Martin Luther King Jr. holiday.
As traders speculate on possible further tapering, the Fed
plans to buy, later on Tuesday, $1.00 billion to $1.50 billion
in Treasuries due in 2036 to 2043, which is its latest QE3
The 30-year bond managed to climb higher due to
traders positioning for the Fed's latest buyback operation at 11
a.m. (1600 GMT). It last traded up 5/32 with a yield of 3.747
percent, down 1 basis point from Friday's close.
Benchmark 10-year Treasuries notes last traded
2/32 lower in price with a yield of 2.834 percent, up about 1
basis point from late on Friday.
The 10-year yield was as high as 2.867 percent overnight
after hitting 2.818 percent last Friday, which was its lowest
level since Dec. 11, according to Reuters data.
Traders and analysts anticipated the 10-year yield to hold
in a range between 2.75 percent to 3.00 percent heading into the
Fed policy meeting next week.
"I don't see a lot to shake us out of this range," D.A.
Davidson's Cullinane said.
(Reporting by Rich Leong)