December 26, 2012 / 4:50 PM / in 5 years

TREASURIES-Bond prices gain on consumer, fiscal worries

* Data hints U.S. holiday shopping season weakest in 4 years
    * Hopes fading on a timely deal on U.S. government budget
    * Trading desks lightly staffed, volume tepid after

    By Richard Leong
    NEW YORK, Dec 26 (Reuters) - U.S. Treasury debt prices rose
on Wednesday in light post-Christmas volume as disappointing
holiday sales and the lack of progress toward a budget deal in
Washington stoked safety bids for bonds.
    Sluggish consumer spending combined with the risk of a
shrinkage in government spending stemming from the 'fiscal
cliff' - a package of automatic federal tax hikes and spending
cuts worth $600 billion - set to go into effect next year will
likely hinder U.S. economic growth in 2013. Such a scenario is
friendly for holding Treasuries even with their measly yields.
    Early data suggested U.S. Christmas shopping grew less than
1 percent from a year ago, which could be the worst year-end
retail season since 2008. Economists blamed the disappointing
sales on anxiety among Americans about their jobs and taxes next
year if politicians fail to reach a timely budget compromise.
    President Barack Obama is due back in Washington early
Thursday for a final effort to negotiate a deal with Congress to
avert or at least postpone the fiscal cliff, but traders have
turned glum that even a temporary fix will be attained by the
Monday deadline. 
    "The market seemed resigned that they might not get a grand
bargain done before the end of the year. The best it can hope
for is a 'kick the can down road' kind of deal so they could
pick it up again early next year," said Larry Milstein, head of
government and agency trading at R.W. Pressprich & Co. in New
    Year-end portfolio adjustments also fed some buying of
Treasuries, which have earned a mediocre return this year,
Milstein said.
    Benchmark 10-year notes were 8/32 higher in
price to yield 1.748 percent, down 2.8 basis points from late on
    The 30-year Treasury bond was 13/32 higher with
a yield of 2.922 percent, down 2.2 basis points from Monday.
    The U.S. bond market was closed on Tuesday for Christmas.
Most major markets in Europe remained closed on Wednesday.
    Trading desks at Wall Street firms and investment houses
were lightly staffed and will likely remain that way until after
New Year's Day.
    Treasuries trading volume was running 70 percent below its
recent average, according to bond broker ICAP.
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