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TREASURIES-U.S. bond prices mostly flat ahead of quarter-end, jobs data
June 30, 2014 / 3:20 PM / 3 years ago

TREASURIES-U.S. bond prices mostly flat ahead of quarter-end, jobs data

* U.S. pending home sales hit 8-month high in May

* Chicago PMI slightly weaker than expected

* Traders eye quarter-end, non-farm payrolls

By Sam Forgione

NEW YORK, June 30 (Reuters) - U.S. Treasuries prices were mostly flat on Monday as traders were reluctant to make sizable bets ahead of the quarter-end and the U.S. government's key jobs report on Thursday, despite strong pending home sales data.

Benchmark Treasuries prices inched lower after data showed U.S. pending home sales hit an eight-month high in May, but quickly turned flat on caution ahead of the close of the second quarter and the upcoming U.S. non-farm payrolls report.

"There is reluctance to have the same size of positions today, because traders don't want to be burned again," said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, referring to their bearish positions at the start of the quarter.

She said traders who had bet on higher interest rates this quarter have been hurt by a decline in yields. Falling yields, which indicate higher prices, have been a trend this year, and the Barclays U.S. Aggregate Bond Index has risen about 3.8 percent on expectations for low inflation and relatively slow growth.

The performance has defied initial expectations by many investors that interest rates would spike higher this year in response to the U.S. Federal Reserve's continued cuts in monthly bond-buying.

The Barclays index has risen 3.82 percent in the first half, led by a rally in long-dated debt as benchmark yields have fallen nearly 0.50 percentage point. Treasuries due in 20 years or longer have earned a 12.67 percent return in the first six months, putting them on track for their strongest first-half performance in four years.

Long-dated investment-grade corporate bonds had a 10.45 percent return. Munis ranked third in total return, generating a 5.97 percent gain, according to Barclays.

The National Association of Realtors said Monday its Pending Home Sales Index, based on contracts signed last month, increased 6.1 percent to 103.9 in May, the highest since September of last year. That high was the latest indication the housing sector was pulling out of a recent soft patch.

Treasuries prices, which edged lower after the data but quickly turned flat, were not likely to have big swings ahead of the payrolls data on Thursday, said Chris McReynolds, head of U.S. Treasury Trading at Barclays in New York.

Economists expect the report to show employers added 212,000 jobs in June, down from 217,000 jobs in May, according to a Reuters poll.

Traders largely shrugged off data showing the Institute for Supply Management-Chicago business barometer fell to 62.6 from 65.5 in May. Economists looked for a reading of 63 in June. The reading measures the pace of business activity in the U.S. Midwest.

Benchmark 10-year Treasuries notes traded 1/32 higher in price to yield 2.53 percent, roughly unchanged from late Friday. U.S. 30-year Treasuries bonds last traded 6/32 higher in price for a yield of 3.35 percent, versus 3.36 percent late Friday.

On Wall Street, the benchmark S&P 500 stock index was off 0.1 percent. (Reporting by Sam Forgione; Editing by Jeffrey Benkoe)

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