Bonds News

TREASURIES-Yields hit nearly one-week high after strong U.S. data, weak auction

* Treasury yields rise after strong Case-Shiller U.S. home
    * Yields remain near highs after strong consumer confidence
    * U.S. 30-year yields at highest since Dec. 21
    * Weak 2-year auction bid sends yields to highest since Dec.

 (Updates to afternoon trading, adds analyst quote)
    By Dion Rabouin
    NEW YORK, Dec 27 (Reuters) - U.S. Treasury yields rose on
Tuesday to their highest levels in nearly a week after strong
data reinforced the theme of a strengthening U.S. economy and
rising inflation.
    Yields on most maturities touched their highest levels of
the day after the release of solid readings on the U.S housing
    Data from the S&P CoreLogic Case-Shiller composite index
showed U.S. metro area home prices increased modestly in
October, gaining slightly more than expected for the
month-on-month readings. The Case-Shiller index was the latest
in a number of solid reports on the U.S. economy showing
inflation may already be gaining steam. 
    "Home prices and the economy are both enjoying robust
numbers," said David M. Blitzer, managing director and chairman
of the index committee at S&P Dow Jones Indices.
    Benchmark 10-year Treasury notes fell 9/32 in
price to yield 2.571 percent, while yields on the 30-year bond
 rose to 3.151 percent, the highest since Dec. 21.
    Rising inflation lowers the value of already-held bonds,
with Treasuries of longer-dated maturities generally being the
most sensitive.
    Low-volume trading following the Christmas holiday that
closed markets on Monday and ahead of the New Year holiday this
weekend also exaggerated moves, analysts said.
    "The numbers were stronger than expected so that kind of
puts you in a direction, and the thinness in this market
probably puts you this far in that direction," said Lou Brien,
market strategist at DRW Trading in Chicago. "It doesn't take
much selling or buying to push it one way or another this week."
    The market produced a limited reaction to U.S. consumer
confidence data, which rose to its highest level in 15 years
this month as expectations for strength in job growth, business
conditions and the stock market continued to build following the
U.S. presidential election. 
    Shorter-dated U.S. 2-year and 3-year note
 yields rose to their highest since Dec. 20 and Dec.
21, respectively, after light bidding for the government's
auction of $26 billion in 2-year notes, which sold at a yield of
1.28 percent.
    "The calendar brought enough news to warrant some trading -
as did an oil rally - but enthusiasm is limp," said Jim Vogel,
interest rate strategist at FTN Financial, in a statement to

 (Reporting by Dion Rabouin; Editing by Chizu Nomiyama)