* Yellen testimony in focus, Fed chair seen sticking to
* Traders looking to auctions this week
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 10 U.S. Treasury debt prices were
little changed to slightly lower on Monday in thin trading,
after a rally the previous session following a soft U.S.
non-farm payrolls report, with markets looking to this week's
heavy supply on both the short and long-end.
Markets are also awaiting the first testimony of Federal
Reserve Chair Janet Yellen, who testifies in Congress on Tuesday
and Thursday after a second month of weaker-than-expected U.S.
"A lot of the action is looking forward to supply over the
next three days," said Guy LeBas, chief fixed income strategist,
at Janney Montgomery Scott in Philadelphia.
"We're in a little bit of a downtrend ahead of long duration
supply and questions and discussions about the Yellen
There was nothing on the U.S. data calendar on Monday except
for the large T-bill auctions, including $84 bln in three- and
six-month bills and $50 bln of l72-day cash management bills.
The Treasury, meanwhile, will sell $70 billion in new
coupon-bearing debt this week, including $30 billion in
three-year notes, $24 billion in 10-year notes and $16 billion
in 30-year bonds.
The Fed, meanwhile, will purchase between $2.25 billion and
$2.75 billion in notes due 2021 to 2023 on Monday. It bought
$659 million in notes due 2024 to 2031 on Friday as part of its
Benchmark 10-year Treasuries were last flat in
price to yield 2.67 percent, down from 2.69 percent last Friday.
Thirty-year bonds also slipped 1/32 to yield 3.66
percent, down from 3.68 percent the previous session.
LeBas expects Yellen to stick to the script -- giving a
balanced assessment of the U.S. economy and therefore keeping
the Fed's reduction of the its bond purchases on track.
"There were hopes built up on Friday that the Fed will come
to the rescue given the state of the recent weak economic data,
but the market will more likely be disappointed."
Five-year notes were down 1/32 in price to yield
1.46 percent, while seven-year notes were flat to
yield 2.12 percent.
As for the Treasury auctions this week, Action Economics
believes the three-year note should benefit from the Fed's
forward guidance, which reiterated in the Jan. 29 policy
statement that rates will remain low for some time.
"We don't think the proximity of the unemployment rate to
the 6.5 percent rule threshold will limit buyers much as the
other part of the rate strategy, inflation, is still far off its
2 percent target."