February 27, 2013 / 2:25 PM / 5 years ago

TREASURIES-Prices gain as U.S. austerity looms, before auction

* Prices gain as U.S. spending cuts loom
    * Month-end extension buying seen adding bond bid
    * Treasury to auction $29 billion seven-year notes
    * Fed to buy $4.25 billion to $5.25 billion debt due 2017

    By Karen Brettell
    NEW YORK, Feb 27 (Reuters) - U.S Treasuries gained in price
on Wednesday and benchmark yields traded near their lowest
levels in a month as concern over the effect of government
spending cuts on U.S. economic growth boosted demand for
safe-haven debt.
    Political uncertainty in Italy and demand for bonds as
investors readjust bond portfolios for month-end added to the
bond rally.
    "It may be month-end extensions, or fear of sequestration,
but the market has a very strong bid to it," said Charles
Comiskey, head of Treasuries trading at Bank of Nova Scotia in
New York.
    Automatic, across the board spending cuts will come into
force on Friday unless lawmakers agree on other measures to help
reduce the U.S. deficit.
    Benchmark 10-year Treasuries gained 11/32 in
price to yield 1.85 percent, down from 1.89 percent late on
Tuesday. The notes have rallied from yields of around 2 percent
last week.
    Traders said the notes may next test resistance at around
1.82 percent.
    Thirty-year Treasuries bonds gained 24/32 in
price to yield 3.04 percent, down from 3.08 percent late on
    Treasuries gained even after data showed a jump in durable
goods orders, excluding aircraft. 
    The government also will auction $29 billion in seven-year
notes later on Wednesday, the final sale of $99 billion in new
debt this week.
    Bonds were further boosted after Federal Reserve Chairman
Ben Bernanke on Tuesday strongly defended the U.S. central
bank's bond purchase program.
    The Fed will purchase between $4.25 billion and $5.25
billion in debt due 2017 on Wednesday as part of this ongoing
quantitative easing meant to help stimulate the economy and
reduce the jobless rate.
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