March 10, 2014 / 8:26 PM / in 3 years

TREASURIES-U.S. bond prices mostly flat ahead of supply

3 Min Read

* Investors await Treasury debt auctions

* Bond prices stable after last week's drop

* China's trade balance swings to deficit

By Sam Forgione

NEW YORK, March 10 (Reuters) - U.S. Treasuries prices were roughly unchanged on Monday ahead of U.S. government debt auctions this week that are expected to attract buyers after a drop in benchmark bond prices.

The Treasury will sell $64 billion in new coupon-bearing debt this week, including $30 billion in three-year notes, $21 billion in 10-year notes and $13 billion in 30-year bonds.

"People are taking a breather and waiting to buy into supply," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago.

Hoogendoorn said the auctions should do "pretty well" given reduced prices on benchmark bonds. The yield on the benchmark 10-year U.S. Treasury note rose 18 basis points to 2.79 percent last week. Bond yields move inversely to their prices.

The yield on the 10-year Treasury hit 2.82 percent on Friday, marking its highest level in six weeks after a calming of geopolitical tensions in Russia and Ukraine and stronger-than-expected U.S. jobs data spurred selling of the safe-haven bonds.

Prices on benchmark 10-year U.S. Treasuries were last up 3/32 to yield 2.78 percent. That yield was down just slightly from last Friday, when the 10-year yield traded at 2.79 percent.

Traders said the slight gain in benchmark Treasuries came after data on Saturday showed China's exports unexpectedly tumbled 18 percent year-on-year in February, swinging the trade balance into deficit and adding to fears of a slowdown in the world's No. 2 economy.

The upcoming debt auctions limited the gains in Treasuries prices, however, said Lou Brien, market strategist at DRW Trading in Chicago. He said that the ongoing tensions between Russia and Ukraine could still drive benchmark bond prices higher this week.

In Crimea, unidentified armed men fired in the air as they moved into a Ukrainian naval post on Monday in the latest confrontation since Russian military groups seized control of the Black Sea peninsula.

Russia said the United States had spurned an invitation to hold new talks on resolving the crisis.

"There's enough trepidation about what's going on in the Ukraine that you're going to see a bid in Treasuries," Brien of DRW Trading said.

On Wall Street, the benchmark Standard & Poor's 500 stock index pared earlier losses to trade down just 0.05 percent. The weak Chinese economic data and lingering concerns over Russia and Ukraine hurt global stocks.

The U.S. Federal Reserve bought $2.47 billion in U.S. Treasuries maturing between May 2022 and Nov. 2023 on Monday, but the purchases had little effect on Treasuries prices.

The 30-year Treasury bond last traded up 1/32 in price to yield 3.72 percent, roughly unchanged from Friday.

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