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TREASURIES-Yields dip on mixed economic data, stalled stimulus

 (Adds 7-yr auction results; Barkin, Evans comments)
    By Chuck Mikolajczak
    Sept 24 - U.S. Treasury yields fell on Thursday as labor
market data signaled the economic recovery may be running out of
gas, but moved off lows after a stronger-than-expected report on
the housing sector. 
    Initial claims for state unemployment benefits increased
4,000 to a seasonally-adjusted 870,000 for the week ended Sept.
19, compared to 866,000 in the prior week and the 840,000
forecast. Data for the prior week was revised to show 6,000 more
applications received than previously reported.
    Claims remain well above the peak during the Great Recession
from 2007 to 2009, with talks for a new fiscal stimulus package
at a standstill and seeming unlikely to be reached before the
Nov. 3 presidential election. 
    Without fresh aid, the United States is "taking a very
serious and unnecessary risk," said Chicago Federal Reserve Bank
President Charles Evans on Thursday. 
    "People want to sell the market because of what is going to
take place in the election, then there are those who need to buy
yield and any time the market backs up they are right in there,"
said Tom di Galoma, managing director at Seaport Global Holdings
in New York. 
    "That is why we are in a very tight trading range at this
point until we see bigger news on further stimulus or something
that could drive the market one way or the other."
    A report from the Commerce Department that showed new
single-family home sales rose to their highest level in nearly
14 years in August helped yields pare declines, as the housing
market continues to be a bright spot even as the economic
recovery seems to be sputtering.
    The yield on 10-year Treasury notes was down 0.7
basis points to 0.669%. 
    The yield on the 10-year remained within the six-basis-point
range it has held since the Fed's most recent policy statement
on Sept. 16. On Thursday, Boston Federal Reserve Bank President
Eric Rosengren said the U.S. economy is far from maximum
employment or 2% inflation, and interest rates will stay low for
several years.
    Also commenting was Richmond Federal Reserve Bank President
Tom Barkin, who said while the central bank's new policy may
help to modestly boost inflation expectations it has the freedom
to raise rates if financial stability risks appear or if
inflation rises too quickly.
    The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 0.2
basis points at 0.137%.
    Bidding for an afternoon auction of $50 billion worth of
seven-year notes was described as solid by analysts, with
dealers accounting for 20.5% of accepted bids compared to 21.7%
on average, according to a note from Ben Jeffery of BMO Capital
Markets.
    
    
      September 24 Thursday 2:21PM New York / 1821 GMT
                               Price                  
 US T BONDS DEC0               176-28/32    0-13/32   
 10YR TNotes DEC0              139-140/256  0-12/256  
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             0.095        0.0963    -0.003
 Six-month bills               0.105        0.1065    -0.001
 Two-year note                 99-250/256   0.1367    -0.002
 Three-year note               99-230/256   0.1593    0.000
 Five-year note                99-222/256   0.2768    -0.002
 Seven-year note               100-72/256   0.4587    -0.002
 10-year note                  99-148/256   0.6692    -0.007
 20-year bond                  98-228/256   1.1878    -0.018
 30-year bond                  99-68/256    1.4052    -0.020
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         9.00         0.75    
 spread                                               
 U.S. 3-year dollar swap         8.25         0.75    
 spread                                               
 U.S. 5-year dollar swap         6.50         0.25    
 spread                                               
 U.S. 10-year dollar swap        2.00         1.00    
 spread                                               
 U.S. 30-year dollar swap      -34.00         1.75    
 spread (Reporting by Chuck Mikolajczak
Editing by Nick Zieminski and Tom Brown)
  
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