February 26, 2014 / 12:20 AM / in 4 years

CORRECTED-TREASURIES-Prices up, yields sag on soft U.S. consumer confidence

(Corrects paragraph 5 to show economists expected a consumer confidence reading of 80.0 and not a slight gain)

* Gains strongest in 30-year bond

* Consumers wary of the outlook for jobs and businesses

* U.S. Treasury sells $32 billion of 2-year notes

By Michael Connor

NEW YORK, Feb 25 (Reuters) - U.S. Treasuries’ prices rose on Tuesday as traders focused on weakening U.S. consumer confidence and ignored stronger-than-expected data showing that U.S. home prices last year climbed the most since 2005.

The 30-year U.S. Treasury bond made the strongest gain.

Insurance companies and pension funds with extended investment horizons were likely buyers of the 30-year Treasuries, according to rate-strategist Boris Rjavinski at UBS in Stamford, Connecticut.

“Pensions and insurance companies have long-dated liabilities,” Rjavinski said. “The long bond is one of the best matches for them.”

After falling on Monday, the 30-year bond was up 27/32 of a point in price following the release of The Conference Board’s index of consumer confidence. The index fell to 78.1 in February from a downwardly revised 79.4 in January. Economists in a Reuters poll had expected a February reading of 80.0..

That left the 30-year bond’s yield at 3.665 percent, compared with 3.701 percent on Monday and a session low on Tuesday of 3.657 percent touched after the consumer confidence index was published.

The benchmark 10-year U.S. Treasury note rose 12/32 in price to yield 2.705 percent, down from 2.745 percent on Monday. The session low was 2.7 percent.

Shorter maturities were mixed, with more modest gains or small price declines.

The market’s reaction to the drop in the confidence index might be overdone and was unlikely to diminish broad expectations that interest rates will rise, market strategists said.

“It’s a modest drop,” said Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management in Portland, Oregon. “It could actually be related to the pullback in equities that’s now ending. We expect it to be transitory.”

TD Securities strategist Gennadiy Goldberg blamed the index decline on a fall in expectations among survey takers that is likely to be reversed.

“We look for the removal of debt ceiling uncertainty and a recovery in equity prices to help support the expectations component of the index in future months, with confidence continuing to show modest improvement,” Goldberg said.

Treasury prices increased early in New York trading and reacted little to the release of the S&P/Case-Shiller composite index posting a better-than-forecast 0.8 percent rise in single-family home prices during December from November.

The index drawn from 20 metropolitan regions also showed a 13.4 percent year-on-year gain in home prices, which S&P Dow Jones Indices said was the best annual increase in eight years.

The U.S. Treasury Department on Tuesday sold $32 billion of 2-year notes at a high yield of 0.340 percent, or 1 basis point below the when-issued level just ahead of the sale as gauged by Reuters data.

Reporting by Michael Connor; Editing by Dan Grebler and Jan Paschal

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