* Weaker-than-expected Chinese data revives bond bids
* In-line U.S. jobless claims signal moderate job growth
* U.S. to debut $15 bln in two-year floating-rate notes
* U.S. to sell $15 bln in 10-year inflation-protected debt
By Richard Leong
NEW YORK, Jan 23 U.S. Treasuries prices climbed
on Thursday as losses on Wall Street and data suggesting a
slowing in Chinese manufacturing revived safe haven bids for
Chinese factory figures and an industry report showing
weaker factory growth in the United States reduced bets the
Federal Reserve would accelerate its pace of trimming its
bond-purchase stimulus. This helped propel benchmark yields to
their lowest levels in nearly six weeks.
China's Flash Markit/HSBC PMI fell to 49.6 in January from
December's 50.5, showing a faster rate of decrease in new export
orders and employment. A reading below 50 signals a contraction
in the manufacturing sector of the world's second-largest
"We started the day in positive territory on the Chinese
data, which was a bit concerning," said Larry Milstein, head of
government and agency trading at R.W. Pressprich & Co. in New
Bond investors are starting to look ahead to next Wednesday,
when the Treasury will hold its inaugural auction of two-year
This is the first new type of U.S. government debt security
since the introduction of Treasury Inflation-Protected
Securities in 1997.
The debut of $15 billion in the two-year floating-rate note
issue joins next week's fixed-rate supply of two-year debt ($32
billion), five-year notes ($35 billion) and seven-year debt ($29
In the meantime, the Treasury will sell $15 billion in
10-year TIPS at 1 p.m. (1600 GMT). Traders
expected the latest 10-year TIPS supply to sell at a yield of
0.669 percent, which would be highest yield set at a 10-year
TIPS auction since May 2011.
While U.S. and Chinese manufacturing data fell short of
expectations, a government snapshot of the domestic labor market
was mildly encouraging.
The U.S. Labor Department said 326,000 workers filed for
first-time unemployment benefits in the week ended Jan. 18,
matching the median forecast among economists polled by Reuters.
"The recent bag of data have been mixed at best, but it's
not enough to derail the Fed from tapering at each meeting this
year. The data have to really roll over," R.W. Pressprich's
Fed policy-makers will meet next Tuesday and Wednesday and
analysts anticipate they will decide to further shrink their
third round of quantitative easing which is aimed to hold down
long-term borrowing costs to help the economy.
In December, the Federal Open Market Committee pared its
monthly purchases of Treasuries and mortgage-backed securities
by $10 billion to $75 billion in January. The Fed's
policy-setting group is expected by some analysts to cut its
monthly purchases by another $10 billion at its upcoming
Some traders and analysts downplayed the rise in bond prices
as trading volume has remained below-average due to
holiday-shortened week and a lack of top-tier U.S. economic
"We squeezed some of the shorts out, but we have been
largely stuck in a narrow range for 1-1/2 weeks," said Thomas
Roth, executive director of U.S. government bond trading at
Mitsubishi UFJ Securities USA in New York.
On the open market, benchmark 10-year Treasury notes
were 16/32 higher in price with a yield of 2.801
percent, down 6 basis points from late on Wednesday.
The 10-year yield touched 2.803 percent following a
weaker-than-expected rise in U.S. existing home sales in
The 30-year bond rose 29/32 in price to yield
3.708 percent, down 5 basis points from Wednesday's close. The
30-year yield hit 3.706 percent earlier, which was its lowest
level since early November, according to Reuters data.
The long-dated maturity was also bolstered by the Fed's
latest QE3 buy-back, where the central bank purchased $1.39
billion in Treasuries due 2038-2043.
On Wall Street, the three major stock indexes fell sharply
in early trading with the Standard & Poor's 500 index
losing 0.9 percent on the weak Chinese factory data.