January 2, 2014 / 5:30 PM / 4 years ago

TREASURIES-Bond prices rise as investors shy away from stocks

* Volumes could continue light on Thursday
    * Jobless claims dip, but little market impact
    * Manufacturing data in line with expectations

    By Luciana Lopez
    NEW YORK, Jan 2 (Reuters) - U.S. Treasuries prices rose on
Thursday, reversing an earlier fall that had driven yields to
more than two-year highs, with investors moving out of stocks
after last year's jump.
    "We're seeing some of that dynamic, weaker stocks, money
going into Treasuries," said Kim Rupert, managing director for
global fixed income analysis at Action Economics.
    In addition, she said, with 10-year yields having broken 3
percent recently and 30-year yields near 4 percent, investors
were reluctant to push much more. 
    "The market has tested those levels a couple of times and
really hasn't been able to penetrate," she said.
    For those levels to be pierced conclusively, she said,
investors need a clearer grasp of the economy, particularly with
regard to data.
    Figures on Thursday did little to help.
    The number of Americans filing new claims for unemployment
benefits fell last week, but analysts said the data reflected
seasonal volatility, muting the impact on the market. 
    "This one's not really worth paying attention to until about
the end of January, when we should start to see what I would say
are cleaner claims number" as the holiday season's effects fade,
said Gennadiy Goldberg, a U.S. strategist with TD Securities in
New York.
    "I still think the trend is lower," he added.
    In addition, U.S. manufacturing grew at a slightly slower
pace in December, matching expectations in a Reuters poll.
    Volumes, low in recent sessions, could continue light on
Thursday, with many traders still out on end-of-year holidays.  
    The U.S. 30-year bond gained 12/32 in price to
yield 3.921 percent from 3.942 percent late on Tuesday.
    The benchmark 10-year Treasury note rose 5/32 in
price to yield 2.987 percent, compared with 3.006 percent late
on Tuesday. The yield rose as high as 3.041 percent earlier on
    Markets were closed on Wednesday for the New Year's holiday.
    The 10-year yield broke above the psychologically key number
of 3 percent last week to hit its highest level in more than two
years after the Federal Reserve last month said it would slow
its massive bond-buying program.
    The pullback in the Fed's purchases, to $75 billion per
month in Treasuries and mortgage-backed securities from $85
billion, capped months of speculation about when the U.S.
central bank might see enough improvement in the world's biggest
economy to withdraw some of its stimulus.
    Speculation on when tapering would begin helped drive a jump
of about 125 basis points in the U.S. 10-year yield last year.
    Nevertheless, Fed policymakers have suggested they will hold
short-term interest rates near zero for an extended time.
    Now investors are looking to see how the Fed might act under
a new chair. Ben Bernanke's term as chairman of the Fed expires
at the end of January, and Janet Yellen, the current vice chair,
is expected to win full Senate approval to succeed him.
    Yellen is widely perceived as dovish, with a close interest
in boosting employment.
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