December 13, 2012 / 5:01 PM / 5 years ago

TREASURIES-Prices ease on jobless claims, bond sale

* Treasury to auction $13 billion of 30-year bonds
    * U.S. weekly jobless claims lower than expected
    * Investors mull impact of Fed unemployment target

    By Chris Reese
    NEW YORK, Dec 13 (Reuters) - U.S. Treasury debt yields rose
for a third consecutive day on Thursday as investors pushed
prices down, heading into an auction of $13 billion of 30-year
bonds in the afternoon and ahead of further debt sales next
    Prices were also undermined by data showing claims for
unemployment benefits were lower than expected in the latest
week, which diminished some of the safe-haven luster of
lower-risk U.S. government debt.
    Losses were limited, however, as investors mulled the
long-term impact of the Federal Reserve's announcement on
Wednesday to link monetary policy to specific targets for
unemployment and inflation.
    "The general thought is we have an auction today, but after
that you have to look at risk as a whole," said Matt Duch,
portfolio manager at Calvert Investments in Bethesda, Maryland.
    The benchmark 10-year Treasury note was trading
with a yield of 1.72 percent, marking the highest yield in more
than a month and up from a high yield of 1.65 percent in an
auction of $21 billion of the notes on Wednesday.
    Data on Thursday showed seasonally adjusted initial state
jobless benefit claims dipped to 343,000 in the week ended Dec.
8, down from a revised 372,000 the previous week and below
expectations for a reading of 370,000. 
    Separately, data showed retail sales rose in November while
producer prices fell.
    "The main surprise is the fall in initial claims, which
suggests the labor market might be improving a bit quicker than
expected, and that would mean the unemployment rate might reach
the Fed's new target a bit quicker than some people think," said
David Sloan, an economist at 4Cast Ltd in New York.
    The Fed announced a new round of monetary stimulus on
Wednesday and took the unprecedented step of saying interest
rates would remain near zero until the U.S. unemployment rate
falls to at least 6.5 percent. 
    Analysts said market reaction was contained as investors
mulled what to make of the announcement. But many predicted
tying monetary policy more explicitly to economic data would
make markets vulnerable to price swings.
    The U.S. central bank previously said it expected to hold
rates near zero through at least mid-2015.
    Analysts said any U.S. Treasury sell-off was limited by
concerns over whether U.S. lawmakers will agree on a deal to
avoid a $600 billion mix of spending reductions and expiring tax
cuts set to begin in 2013.
    Such worries were underscored by Fed Chairman Ben Bernanke
on Wednesday, who warned that running over this "fiscal cliff"
would lead to a new recession. He told reporters the Fed could
ramp up its bond buying "a bit" but emphasized that monetary
policy has limits and could not fully offset the impact.
    While pondering the Fed's latest steps and the potential
U.S. fiscal crisis, investors were keen to reduce prices going
into the 30-year bond auction on Thursday afternoon.
    The Treasury sold $32 billion of three-year notes on Tuesday
and $21 billion of 10-year notes on Wednesday. Next week it will
sell two-year, five-year and seven-year notes as well as
five-year Treasury inflation-protected securities.
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