June 16, 2014 / 1:50 PM / in 3 years

TREASURIES-Prices up on Iraq safety buying; US data limits gains

* Bonds gain safety bid on Iraq, Ukraine tensions
    * Prices pare gains on solid US economic data
    * Fed meeting on Wednesday in focus

    By Karen Brettell
    NEW YORK, June 16 (Reuters) - U.S. Treasuries prices rose on
Monday as fighting in Iraq and Ukraine increased demand for
safe-haven bonds, though solid U.S. economic data limited gains.
    Worries about Iraq were intensifying after Sunni insurgents
seized a mainly ethnic Turkmen city in northwestern Iraq on
Sunday after heavy fighting, solidifying their grip on the north
after a lightning offensive that threatens to dismember Iraq.
 
    Russian natural gas exporter Gazprom also reduced
supplies to Ukraine on Monday after Kiev failed to meet a
deadline to pay off its gas debts in a dispute that could
disrupt supplies to the rest of Europe. 
    "There was a reasonable flight-to-quality bid overnight with
the developments in Iraq and Gazprom, so global equities were
under a fair amount of pressure and that gave a bid to longer-
dated Treasuries," said Ian Lyngen, senior government bond
trader at CRT Capital in Stamford, Connecticut.
    "We've given some of that up in the wake of the industrial
production numbers," Lyngen added.
    U.S. manufacturing output rose solidly in May as production
increased across the board, bolstering expectations that
economic growth would rebound strongly this quarter.
 
    Benchmark 10-year notes were last up 2/32 in
price to yield 2.60 percent, after earlier falling as low as
2.58 percent. Thirty-year bonds gained 6/32 in price
to yield 3.41 percent, after earlier falling to 3.35 percent
    A gauge of manufacturing in New York state also rose in
June, advancing as a read on new orders climbed to its highest
level in nearly four years, the New York Federal Reserve said in
a report on Monday. 
    A number of data releases including housing data later on
Monday, and consumer price data on Tuesday will also be watched.
    Investors this week are also focused on the Federal
Reserve's monetary policy statement on Wednesday, when the U.S.
central bank is expected to announce it will continue paring its
bond purchase program. The Fed is also expected to cut its
growth projections.
    The Fed will on Monday buy between $2.25 billion and $3
billion in notes due in 2018 and 2019 as part of its ongoing
purchases.

 (Editing by W Simon)

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