February 13, 2013 / 9:17 PM / in 5 years

TREASURIES-Prices fall after lukewarm 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

    By Karen Brettell and Luciana Lopez
    NEW YORK, Feb 13 (Reuters) - Prices of U.S. Treasuries slid
on Wednesday after a tepid sale of 10-year debt, with yields
testing key technical levels but still unable to break through
recent ranges.
    The Treasury sold $24 billion in 10-year notes at a high
yield of 2.046 percent, above what 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 on Thursday and sold $32 billion of three-year notes on
    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 10-year note yields hold a break above the 2.03 percent
to 2.06 percent level, then technical analysis suggests they may
next climb to the 2.20 percent area.
    Benchmark 10-year notes were last trading off
12/32 in price to yield 2.021 percent, up from 1.98 percent late
on Tuesday.
    The debt briefly pared price losses after data earlier in
the day 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
    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
    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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