March 15, 2013 / 3:36 PM / 5 years ago

TREASURIES-Prices gain after debt sales, falling consumer sentiment

* Early March consumer sentiment gauge lowest since Dec 2011
    * Fed not expected to halt asset purchases anytime soon
    * Lipper data shows money flowing out of bond funds in the
latest week

    By Chris Reese
    NEW YORK, March 15 (Reuters) - U.S. Treasury debt prices
rose on Friday as weakness in the stock market and an unexpected
drop in March U.S. consumer sentiment bolstered the safe-haven
allure of Treasuries.
    With $66 billion of new debt supply out of the way this
week, investors were also moving to take advantage of yields
hovering near the highest in almost a year, analysts said.
    Prices rose on Friday after the Thomson Reuters/University
of Michigan's preliminary reading on the overall index on
consumer sentiment for early March tumbled to the lowest since
December 2011. 
    "We're past the auctions, we're still near the highest
yields in roughly a year, which are levels that are appealing to
some investors, and the confidence numbers are buoying the
market," said David Coard, head of fixed income sales and
trading at The Williams Capital Group in New York.
    Benchmark 10-year Treasury notes on Friday were
trading 12/32 higher in price to yield 2.00 percent, down from
2.04 percent late Thursday. Yields remain not far off the
11-month high of 2.09 percent reached late last week after data
showing stronger-than-expected U.S. jobs growth in February.
    The Treasury this week sold three-year and 10-year notes as
well as 30-year bonds, and investors were buying to absorb the
supply, Coard said.
    Treasuries were also generally supported by expectations the
Federal Reserve will continue to buy assets over the near term
in an effort to prop up the economy.
    While recent upbeat data on the labor market and retail
sales have fueled optimism on economic growth, some investors
say there has not been enough evidence of a recovery to spur Fed
officials to scale back their program of buying $85 billion per
month of mortgage-backed securities and Treasuries.
    "The doves on the committee will unequivocally want to see
more progress made on the employment backdrop before they even
contemplate tightening the reins on the latest round of
(quantitative easing)," said Michael Cloherty, head of U.S.
rates strategy at RBC Capital Markets in New York.
    The Fed's policy-setting Federal Open Market Committee will
meet on Tuesday and Wednesday next week, although Cloherty said
it is unlikely to signal a slowing of debt purchases just yet.
    "We will need to see the current pace of job gains and
declining unemployment rate continue for a few more months
before the discussion about tapering really begins to develop
some teeth," he said.
    However, investors may be getting nervous about the future
of their Treasury holdings.    
    Bond funds had their weakest turnout this year as investors
committed just $1.23 billion in the week ended March 13, data
from Thomson Reuters Lipper service showed on Thursday. That is
the smallest inflow since the funds suffered outflows of $331.2
million over the week ended Jan. 2.
    Outflows from Treasuries in the week ended Wednesday were
$1.07 billion, which was the largest amount of outflows since
the week ended Oct. 10. Investors seemed to be putting their
money into corporate debt, as inflows to corporate
investor-grade funds were $2.13 billion in the week, which was
the largest since the week ended Jan. 9.
     The Treasuries market was little affected on Friday by
reports showing the biggest increase in consumer prices in
nearly four years last month, while U.S. manufacturing output
bounced back in February.
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