October 10, 2012 / 10:16 AM / 5 years ago

TREASURIES-U.S. bonds dip before 10-year auction

LONDON, Oct 10 (Reuters) - U.S. Treasury prices crept lower on Wednesday as investors braced for a sale of 10-year paper later in the session and 30-year notes on Thursday.

* U.S. 10-year government bond yields rose 1 basis point to 1.72 percent and thirty-year bond yields were up 1.4 basis points at 2.94 percent.

* The Treasury Department sold $32 billion in three-year notes on Tuesday and is due to sell $21 billion in 10-year debt on Wednesday and $13 billion in 30-year bonds on Thursday.

* “More than anything I think guys are setting up for 10-year and 30-year supply,” one trader said. “It should go OK, I still think guys want to be long this market.”

* Uncertainty regarding the global economic outlook and the euro zone debt crisis would likely secure demand for the sale of 10-year paper later in the day, analysts said.

* In its semi-annual check on the world’s financial health, the International Monetary Fund said the euro area’s debt crisis was the main threat and that risks to global financial stability had risen in the last six months, leaving confidence “very fragile”.

* “We have the euro zone crisis continuing, with the U.S. getting closer to a fiscal cliff,” Philip Marey, strategist at Rabobank said, referring to the $500 billion or so in expiring tax cuts and government spending reductions set to take hold at the start of next year.

* “There is still so much uncertainty in the market, so I think there will be enough demand for Treasuries from that perspective.”

* Against this backdrop, the trader expected 10-year yields to dip to the 1.40 percent area heading into the end of the year.

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