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5 years ago
TREASURIES-Treasury prices turn negative after Fed launches stimulus
September 13, 2012 / 5:06 PM / 5 years ago

TREASURIES-Treasury prices turn negative after Fed launches stimulus

* Fed launches third big round of stimulus until jobs
outlook better
    * Treasury sells $13 billion in 30-year bonds
    * U.S. jobless claims rose more than expected due to storm


    By Richard Leong and Luciana Lopez
    NEW YORK, Sept 13 (Reuters) - U.S. government debt prices
erased early gains to sink sharply on Thursday after the Federal
Reserve announced a third big round of stimulus to jump-start
the sluggish economy.
    Treasury prices had advanced earlier in the day but slumped
after the Fed said it would buy $40 billion of mortgage debt per
month and continue to purchase assets until the outlook for jobs
improves substantially. 
    Some analysts said the program was less than the market had
expected from a third round of quantitative easing, or QE.
    "The Fed has under-delivered here. This not full-blown QE3.
They have a lot of flexibility with this statement," said
Anthony Valeri, a fixed income Strategist at LPL Financial in
San Diego. 
    "The long end of the bond market is weaker because there
were expectations of a longer-dated Treasuries purchase
announcement from the Fed. That's why we are seeing a reversal
here after a pretty good 30-year bond auction," he added.
    The U.S. Treasury Department sold $13 billion of 30-year
bonds earlier in the day, in what analysts said was a strong
auction. 
    Traders are now watching for the latest Fed economic
forecasts at 2 p.m. (1800 GMT) and a press conference with Fed
Chairman Ben Bernanke at 2:15 p.m. (1815 GMT).
    Thirty-year bonds were 1-6/32 lower to yield
2.98 percent, after the yield briefly pierced 3 percent for the
first time in about four months.
    The latest figures on U.S. jobless claims and producer
prices did not cause much market reaction. The data largely
reinforced the view of low employment growth and inflation.
    First-time filings for jobless benefits totaled 382,000 last
week, higher than what economists had forecast. The Labor
Department blamed the larger than expected weekly increase on
Tropical Storm Isaac. 
    At the same time, the agency said producer prices rose 1.7
percent in August, the biggest monthly increase since June 2009,
but the core rate which excluded volatile energy and food prices
grew 0.2 percent, in line with estimates.

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