January 10, 2013 / 4:30 PM / 5 years ago

TREASURIES-Prices fall before 30-year debt sale

* Prices fall before $13 billion, 30-year bond sale
    * Fed buys $3.16 bln in notes due 2020-2022
    * Risk-taking in Europe, stocks gains dampen Treasuries

    By Karen Brettell
    NEW YORK, Jan 10 (Reuters) - U.S. bond prices fell on
Thursday after a weak 10-year auction on Wednesday increased
expectations today's 30-year bond sale would need higher yields
to attract demand.
    The Treasury will sell $13 billion in 30-year bonds in its
final sale of $66 billion in coupon-bearing supply this week.
    Demand for safe-haven U.S. debt also ebbed on Thursday after
a strong sale of new Spanish government debt helped risk taking
in Europe and as U.S. stock futures rose.
    "It's a little bit of risk on," said Tom Tucci, head of
Treasuries trading at CIBC in New York. And, "I'm not so sure
that real money managers have appetite for the 30-year sector of
the curve right now."
    Benchmark 10-year notes were last down 11/32 in
price to yield 1.91 percent, up from 1.86 percent late on
    Thirty-year bonds fell 17/32 in price to yield
3.09 percent, up from 3.06 percent on Wednesday.
    The Treasuries auction comes as investors debate whether
2013 will be the year that finally ends the 30-year bull-run in
U.S. government debt.
    Yields are trading near eight-month highs after minutes
released last week from the Federal Reserve's December meeting
sparked speculation that the U.S. central bank may end its bond
purchase program before year-end, sooner than most expected.
    "When the minutes came out it put doubt in people's minds
about the duration on bond purchases, all of a sudden people
started to think that maybe it's not going to happen through the
balance of this year," said Tucci.
    Investors will now be closely watching a speech that Fed
Chairman Ben Bernanke is due to give on Monday at the University
of Michigan for any further indications of how long the Fed's
latest bond purchase program will last.
    Much, however, is likely to depend on the economy as
Bernanke has said he wants to continue stimulus until the
economy is on surer footing and unemployment drops
    "The real crisis we are faced with is getting our economy to
grow at a rate that creates jobs," said David Coard, head of
fixed income sales and trading at The Williams Capital Group in
New York.
    The resolution of the so-called "fiscal cliff" has also
dampened the safety bid for U.S. debt since the beginning of the
    But bigger battles scheduled for the weeks ahead on how to
cut spending and reducing the deficit may bring buyers back to
the debt.
    "We still have the spending debate, that could become
increasingly tricky. I've got to believe that with that looming
out there it's hard to really feel comfortable about ranges,"
said Coard.
    The Fed bought $3.16 billion in notes due from 2020 and 2022
on Thursday as part of its bond purchase program, which is
designed to reduce borrowing rates and spur hiring.

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