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TREASURIES-Bonds fall as Fed refrains on bond purchase
April 25, 2012 / 5:35 PM / in 6 years

TREASURIES-Bonds fall as Fed refrains on bond purchase

* U.S. central bank signals no imminent new policy stimulus
    * Fed sticks to near zero rate policy due to unemployment
    * Strong demand for $35 bln in new five-year notes
    * U.S. durable goods post biggest drop in 3 years


    By Richard Leong	
    NEW YORK, April 25 (Reuters) - U.S. Treasury debt prices
fell o n W ednesday after the Federal Reserve showed no sign it
was in hurry to embark on a third big bout of bond purchases to
stimulate the U.S. economy, even as unemployment remains high.	
    The decline in bond prices was mitigated by strong demand at
a $35 billion auction of new five-year supply, part of this
week's $99 billion in coupon-bearing securities, analysts said.	
    Traders and investors will turn to the Fed's economic staff
release of its updated economic predictions at 2 p.m. (1800
GMT), followed by Fed Chairman Ben Bernanke's press conference
at about 2:15 p.m. (1815 GMT) following the conclusion of this
week's two-day policy meeting. 	
    "We sold off a bit in reaction to the Fed statement. Now
people are waiting for the economic forecasts and see what they
could infer from them," said Jim Vogel, interest rate strategist
at FTN Financial in Memphis, Tennessee.	
    The bond market's losses after the latest statement from the
Federal Open Market Committee were muted compared with its
reaction to the previous one. 	
    On March 13, Treasuries prices began to tumble after the
U.S. central bank modestly upgraded its outlook on the U.S.
economy and offered no hint it was not about to engage in a
third round of quantitative easing, dubbed QE3. In a week, the
10-year yield jumped to 2.40 percent, a near five-month high. 	
    Subsequently, some disappointing U.S. economic data,
together with renewed contagion fears from the euro zone debt
crisis, knocked benchmark yields below 2.00 percent.	
    The government earlier on Wednesday reported durables goods
orders fell 4.2 percent in March, their biggest
monthly drop in three years, as a result of a decline in
aircraft demand and as global growth slows. 	
    Earlier, investors received the sobering news that the
British economy contracted again in the first quarter, marking
its second recession since the worldwide financial crisis more
than three years ago. 	
    On slightly above average volume, benchmark 10-year notes
 last traded down 7/32 in price, yielding 2 percent,
up 3 basis points from late on Tu esday. The 10-year yield
flirted with a two-month low on Mon day on worries about possible
political upheaval in France and the Netherlands.	
    The 30-year bond was down 19/32 in price to
yield 3.16 percent, up 3 basis points from Tuesday's close.	
    Bond prices were briefly unchanged on a wave of buying after
strong demand at the five-year note auction.	
      
  	
    	
    STRONG FIVE-YEAR SALE	
    After a mediocre two-year auction on Tuesday, the latest
five-year note sale commanded surprisingly keen
interest from foreign central banks and other indirect bidders.	
    These five-year securities due in April 2017 cleared at a
yield of 0.887 percent, slightly below traders' expectations.
The yield was slightly above the record auction low of 0.880
percent set back in December. 	
    The overall bidding was the strongest in three months.	
    "Every auction statistic was encouraging," FTN's Vogel said.	
    The Treasury Department will complete this week's auctions
with a $29 billion offering of new seven-year debt
 on Th ursday at 1 p.m. (1700 GMT).	
    In "when-issued" trading, the new seven-year issue was
expected to yield 1.4130 percent early Wednesday afternoon,
below the high yield of 1.5900 percent set at the March auction.

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