May 12, 2014 / 1:26 PM / 4 years ago

TREASURIES-Prices fall before heavy week of data

* Prices fall, yield curve holds at steeper levels
    * Retail sales Tuesday, inflation data Thursday in focus
    * Fed to buy $2.25 bln to $3 bln notes due 2018, 2019

    By Karen Brettell
    NEW YORK, May 12 (Reuters) - U.S. Treasuries prices fell on
Monday before a heavy week of data that includes retail sales
and consumer price reports that will be watched for signs of
economic strength and whether inflation is rising from levels
that are far below the Federal Reserve's targets.
    Treasuries yields rose last week as the Treasury sold new
supply and demand for Thursday's sale of 30-year bonds was weak,
with price losses extending through to Monday as dealers sold
bonds they absorbed during the auctions.
    Improving U.S. economic data and subdued demand for long
bonds at last week's auction has also helped the yield curve
steepen from five-year lows, as the Federal Reserve continues to
pare its bond purchases with an eye on interest rate hikes that
many see as likely to begin next year.
    But Dovish comments from European Central Bank President
Mario Draghi and still low inflation are putting a curb on yield
curve steepening.
    "For the most part we saw a correction steeper after the
refunding, but inflation continues to be tame and that puts a
curb to some of the steepening that we're seeing," said Sean
Murphy, a Treasuries trader at Societe Generale in New York.
    The spread between five-year note yields and thirty-year
bond yields was around 183 basis points on
Monday, after trading at 174 basis points before Thursday's bond
auction and at 167 on May 2, the flattest since 2009.
    Benchmark 10-year notes were last down 4/32 in
price to yield 2.64 percent, the highest since May 2, and up
from 2.62 percent late on Friday. Thirty-year bonds 
dropped 8/32 in price to yield 3.48 percent, the highest since
April 30 and up from 3.47 percent late on Friday.
    U.S. retail sales data for April will be released on Tuesday
and consumer price index data for April is due on Thursday.
    On Monday Philadelphia Fed President Charles Plosser will
speak on labor and economic trends in older communities and the
Treasury will release its monthly budget report.
    The Fed will also buy on Monday between $2.25 billion and $3
billion in notes due 2018 and 2019 as part of its ongoing
purchase program.

 (Editing by James Dalgleish)
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