March 20, 2013 / 6:31 PM / 5 years ago

TREASURIES-Prices drop after rally on Cyprus; Fed stands pat

* Fed holds aggressive stimulus in place
    * Prices fall as investors ponder extent of recent rally
    * Cyprus now seeking a new loan from Russia

    By Luciana Lopez
    NEW YORK, March 20 (Reuters) - Prices for U.S. Treasuries
fell on Wednesday, with investors weighing the extent of a rally
sparked this week by a proposed Cypriot bank tax and the Federal
Reserve holding firm on its aggressive stimulus plan.
    The Fed will keep buying $85 billion in mortgage and
Treasury bonds until the employment outlook picks up markedly,
the U.S. central bank said in a statement. 
    But the bank nonetheless removed a key section of its policy
statement indicating financial conditions had eased, just days
after the European bailout plans for Cyprus roiled global
    "Any concerns that the Fed was going to get more hawkish
don't appear to have panned out," said John Canavan,
fixed-income analyst at Stone & McCarthy Research Associates in
Princeton, New Jersey. 
    "They offered improved projections for the economy and the
unemployment rate over the next couple of years, but that's not
a surprise."
    Prices pared losses slightly on the news but remained lower
on the day.
    The benchmark 10-year note was trading down
11/32 in price to yield 1.941 after the statement.
    Prices for the 30-year bond briefly spiked even
lower after the news but then pared losses. Those bonds were
last down 26/32 in price to yield 3.174 percent.
    Prices for U.S. Treasuries gained this week after fears that
a tax on bank deposits to help fund a bailout for Cyprus could
be adopted elsewhere in the euro zone, including Italy and
   Cypriot lawmakers overwhelmingly rejected the deeply
unpopular tax on Tuesday, and the island nation is now pleading
for a new loan from Russia to avert a financial meltdown.

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