* Prices drop as selling increases; economic data mixed
* Treasury sells $9 bln TIPS to tepid demand
* Fed buys $2.66 bln notes due 2022 and 2023
* Fed to buy $1 bln-$1.25 bln bonds due 2036-2044 Friday
By Karen Brettell
NEW YORK, Feb 20 U.S. Treasuries yields rose
back to the higher end of their recent range on Thursday as
traders reported an uptick in investors selling bonds and
prepared for new Treasury supply next week.
Treasuries yields have held in a relatively tight range in
the past two weeks as investors evaluate whether a recent spate
of weakening economic data reflects a slowing economy or
transitory weakness due to bad weather.
Questions over the strength of the economy and a safety bid
from volatility in emerging markets have also pushed yields
below where some analysts see their fair value.
The current 10-year yield "is partly due to the emerging
market crisis and party due to economic data that has
disappointed It's really been the surprise factor in U.S.
economic data that's kept rates much lower" than they should be,
said Aaron Kohli, an interest rate strategist at BNP Paribas in
BNP sees benchmark 10-year yields as fairly
valued at between 3.00 percent and 3.25 percent, a quarter of a
percentage point higher than their current levels of 2.76
Data earlier on Thursday was mixed with weekly jobless
claims edging down and consumer prices inching higher. A
manufacturing survey in the mid-Atlantic region also tumbled to
the lowest in a year, while a survey of national factory
activity grew in February at its fastest pace in nearly four
Investors will monitor existing home sales data, set to be
released on Friday, but they said they expect consumer
confidence figures, due on Tuesday, to have a more significant
impact on the market.
Five-year and seven-year notes were the worst performers on
Thursday before new supply of the notes next week.
The government said on Thursday it will sell $96 billion in
new coupon-bearing supply next week, including $32 billion in
two-year notes, $35 billion in five-year notes and $29 billion
in seven-year notes.
Five-year notes fell 4/32 in price to yield 1.55
percent, up from 1.51 percent and seven-year notes
were also down 3/32 in price to yield 2.19 percent, up from 2.16
Stocks also gained on Thursday, reducing demand for U.S.
The Treasury also sold $9 billion in new 30-year Treasury
Inflation-Protected Securities (TIPS) on Thursday at a high
yield of 1.495 percent, around 2 basis points higher than where
the debt had traded before the sale.
The auction saw relatively low demand with a bid-to-offer
ratio of 2.34 times, the lowest level since the government
reintroduced the maturity in February 2010. There was
nonetheless strong demand from indirect bidders, which include
mutual funds and some central banks, who took 56 percent of the
The Fed bought $2.66 billion in notes due in 2022 and 2023
on Thursday as part of its ongoing purchase program. It will buy
between $1 billion and $1.25 billion in bonds due 2036 and 2044