February 13, 2013 / 7:51 PM / 5 years ago

TREASURIES-Prices slip after tepid 10-year auction

* Yields rise after $24 billion 10-year note sale
    * 10-year notes test technical support levels
    * Treasuries temporarily pare price losses on retail sales
data

    By Karen Brettell and Luciana Lopez
    NEW YORK, Feb 13 (Reuters) - Prices for U.S. Treasuries fell
on Wednesday after a tepid sale of 10-year debt, with yields
within recent ranges as they continue to test key technical
levels.
    The Treasury sold $24 billion in 10-year notes Wednesday at
a high yield of 2.046 percent, higher than the market had
expected. 
    "We had an average, arguably a bit of a soft reception to
the 10-year auction," said Ian Lyngen, senior government bond
strategist at CRT Capital LLC in Stamford, Connecticut.
    "Twenty-four billion is a lot to take down, particularly
ahead of $16 (billion) in 30-years tomorrow."
    The sale was the second round of $72 billion in new coupon
supply this week. The Treasury will sell $16 billion in 30-year
bonds Thursday, and sold $32 billion of three-year notes on
Tuesday.
    But yields were still within recent ranges, albeit toward
the upper end. Benchmark yields reached 2.06 percent early last
week, marking the highest since mid-April.
    "We are at a pretty critical juncture. I think it's going to
be important for the market to hold these levels on a short-term
basis," said Greg Faranello, a Treasuries trader at Societe
Generale in New York.
    If the 10-year notes yields hold a break above the 2.03
percent to 2.06 percent level, then technical analysis suggests 
the debt's yields may next increase to the 2.20 percent area.
    Benchmark 10-year notes were last down 11/32 in price to
yield 2.017 percent, up from 1.98 percent late on Tuesday.
    The debt briefly pared price losses after data earlier on
Wednesday showed little growth in consumer spending in January.
    U.S. retail sales barely rose in the month as tax increases
and higher gasoline prices restrained spending. 
    "The report shows that the economy continues to grow at a
modest pace, but the recovery is far from robust," said Eric
Stein, a portfolio manager at Eaton Vance in Boston.
    Investors are now focused on a package of automatic spending
cuts due to kick in on March 1, unless lawmakers agree on
alternative budget measures or delay negotiations to a later
date.
    The White House has said that cuts will harm economic
growth, though many lawmakers say reduced spending is necessary
to stabilize the country's rising debt load.
    Some analysts expect Treasury yields to fall in the weeks
heading into the debate deadline as investors adjust for the
likely impact of the spending cuts on the economy.
    The Federal Reserve bought $1.45 billion in bonds due from
2036 to 2042 on Wednesday as part of its ongoing bond purchase
program.
    It will also purchase between $4.75 billion and $5.75
billion in debt due from 2017 to 2018 on Thursday.

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