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TREASURIES-U.S. Treasuries steady after cutting losses on weak U.S. data
February 12, 2015 / 8:57 PM / 3 years ago

TREASURIES-U.S. Treasuries steady after cutting losses on weak U.S. data

* Disappointing U.S. data pushes investors back into Treasuries

* Ukraine ceasefire deal had sparked Treasury selling

* 10-year Treasury yield hovering just under 2 pct mark

* 30-year auction characterized as “solid”

By Daniel Bases

NEW YORK, Feb 12 (Reuters) - U.S. Treasury prices pulled back from overnight lows to stand little changed on Thursday as weaker-than-expected reports on retail sales and jobless claims inserted some caution into the economic backdrop and forecasting of U.S. monetary policy.

Investors, seeing a potential de-escalation in the conflict between Ukraine and Russian-backed separatists in the wee hours of Thursday with a new cease-fire agreement, had trimmed their positions in safe-haven U.S. Treasuries.

The data, which showed U.S. consumer spending barely rebounded in January suggests economic growth was slow at the start of the first quarter, and caused a knee-jerk reaction to buy Treasuries.

The number of American’s filing first-time jobless claims rose more than expected last week; however the underlying trend remains consistent with a strengthening labor market.

“I think the median estimate for first-quarter growth is at 2.6 percent. This retail sales number and its implications for the pace of consumption will shave off a little bit of that GDP forecast,” said Ian Lyngen, senior government bond strategist, CRT Capital in Stamford, Connecticut.

Lyngen added expectations on the timing for the U.S. Federal Reserve to begin raising interest rates later this year are not expected to change.

Treasury price gains were cut back after the auction of $16 billion worth of 30-year bonds. They sold at a yield of 2.56 percent and a bid-to-cover ratio of 2.26.

“It is fair to characterize the auction results as solid particularly since we auctioned off close to the low yield marks of the day,” said Lyngen.

Just ahead of the morning’s retail sales and jobless claims reports the 30-year bond was off 1 full point in price while the benchmark 10-year U.S. Treasury note was down close to half a point in price, keeping the yield above the 2 percent mark.

However, in the wake of the data, the 30-year bond rallied and then stabilized around the unchanged mark for much of the day. It last traded down 4/32 of a point in price to yield 2.57 percent..

Benchmark 10-year Treasury prices were unchanged, yielding 1.98 percent..

“The overnight news on the ceasefire was positive on the geopolitical front, and Treasuries sold off. However, the data this morning on retail sales and jobless claims turned it around. Nothing more complicated than that,” said Michael Pond, global head of inflation market strategy at Barclays in New York. (Reporting By Daniel Bases Editing by Andrea Ricci)

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