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8 months ago
TREASURIES-Bonds firm as volumes dwindle before holiday weekend
December 23, 2016 / 2:05 PM / 8 months ago

TREASURIES-Bonds firm as volumes dwindle before holiday weekend

* Bond market closes early on Friday, closed on Monday
    * Consumer sentiment, housing data due
    * Treasury to sell $88 bln supply next week

    By Karen Brettell
    NEW YORK, Dec 23 (Reuters) - U.S. Treasury prices were
firmer on Friday in thin volumes as investors awaited economic
data due to be released ahead of an extended holiday weekend.
    "We're a little stronger, the curve is a little flatter, but
volume has been anemic," said Justin Lederer, an interest rate
strategist at Cantor Fitzgerald in New York.
    Reports on consumer sentiment and new home sales are due
later on Friday morning.
    Benchmark 10-year notes were last up 3/32 in
price to yield 2.54 percent, down from 2.55 percent late on
Thursday.
    The bond market will have an early close at 2 p.m. EST (1900
GMT) on Friday ahead of Christmas Day.
    Data on Thursday showed the U.S. economy grew faster than
initially thought in the third quarter, while orders for new
U.S.-made capital goods rose more than expected in November.
    Other data on Thursday, however, showed that U.S. consumer
spending increased only modestly in November.
    Investors are preparing for $88 billion in new
coupon-bearing supply next week, which will include $26 billion
in two-year notes on Tuesday, $34 billion in five-year notes on
Wednesday and $28 billion in seven-year notes on Thursday.
    The sales may be need to be offered at a discount to attract
demand as many traders will be away on vacation and some
European markets will also be still closed on Tuesday.
    "December auctions are always a little hard to gauge just
given the time of year," said Lederer.
    That said, "after the big selloff after the election, we
have found some buyers and have found some levels and I'd be
very surprised to see a significant backup," Lederer said.
    Yields have soared since Donald Trump's victory in the U.S.
presidential election last month, as investors bet he will
implement new fiscal stimulus that would boost growth and
inflation.
    Some investors have also been wary of buying bonds as they
evaluate how many times the Federal Reserve is likely to raise
interest rates next year.
    The Fed was more hawkish than expected at its December
meeting last week, indicating that it may raise rates three
times next year.
    That helped to send 10-year note yields to a more than
two-year peak and two-year note yields to their highest levels
since 2009.

 (Editing by Bernadette Baum)

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