By Ellen Freilich
NEW YORK, Dec 18 (Reuters) - U.S. Treasuries prices extended
losses on Wednesday after a lightly bid five-year Treasury note
auction and amid caution just hours before the Federal Reserve
releases its policy statement at the close of its two-day
The value of bids received for the five-year auction
exceeded those accepted by a subdued 2.42 ratio.
'The five-year note auction was terrible,' said John
Canavan, analyst at Stone & McCarthy Research Associates in
Princeton, New Jersey. 'The buyside demand was atrocious, and
indirect bidders in particular avoided this auction like the
Prices of U.S. government bonds had fallen earlier after the
Commerce Department reporter stronger-than-expected U.S. housing
starts in November, which fit a recent pattern of improved
economic data that could make it easier for the Fed to begin
trimming its large-scale asset purchases aimed at stimulating
'All eyes are on the Federal Reserve announcement at two
o'clock, with a number of market participants increasing their
odds for tapering given positive labor market and growth data
over the past several weeks,' said Jake Lowery, Treasury trader
and portfolio manager for global interest rates at ING U.S.
The Fed will release its policy decision at 2 p.m. (1900
GMT), followed by a press conference by Fed Chairman Ben
Bernanke at 2:30 p.m., his final press conference as Fed chief.
Daniel Heckman, senior fixed income strategist at U.S. Bank
Wealth Management in Kansas City, Missouri, said the evidence
that 'so far higher rates have not had a real detrimental impact
on housing,' combined with other recent stronger data, including
the employment report for November, give the Fed the flexibility
to make a move.
'Our official stance is January, but we would not be
surprised if something did get announced today, along with
'forward guidance' to make sure the markets remain orderly and
there is no rush for the exits,' Heckman said.
Krishna Memani, chief investment officer of fixed income at
OppenheimerFunds, which has $222.08 billion in assets under
management, said that while recent economic data has been better
than expected, the improvement is modest.
'If the Fed wants to keep the markets focused on the 'low
for long' rate outlook -- more than the tapering, itself -- it
would behoove them not to taper now, but indicate to the market
in no uncertain terms that tapering is definitely coming, that
it's just a matter of timing,' he said.
Supply could remain another source of pressure on the
'Supply is unusually heavy given the constrained holiday
calendar and that could put some further pressure on the curve,'
In addition to the $35 billion in five-year debt sold on
Wednesday, the Treasury will sell $29 billion in
seven-year notes and $16 billion in five-year
Treasury inflation-protected securities on
Benchmark 10-year Treasury notes were down 12/32
in price, their yields rising to 2.88 percent, toward the high
end of their recent range.
The 30-year bond price was down 17/32, its yield
rising to 3.90 percent.
A Reuters poll last week showed 32 economists forecast the
U.S. central bank would act in March, while 22 said it would
scale back its $85 billion monthly bond-buying program in
January. Twelve economists expected a tapering announcement this
(Reporting by Ellen Freilich; Editing by Meredith Mazzilli and
((email@example.com)(+1 646 223-6309)(Reuters
Keywords: MARKETS USA BONDS/
(-------MARKET SNAPSHOT AT 12:45 p.m. EST (1645 GMT)------- Dec T-Bond 129-13/32 (-14/32) Dec 10-Year note 124-05/32 (-13/32) Change vs Current Nyk yield Three-month bills 0.065 (-0.005) 0.066 Six-month bills 0.095 ( unch ) 0.096 Two-year note 99-24/32 (-02/32) 0.356 Five-year note 98-18/32 (-08/32) 1.553 10-year note 98-26/32 (-13/32) 2.887 30-year bond 97-12/32 (-17/32) 3.900 )
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