By Karen Brettell
NEW YORK, June 27 (Reuters) - U.S. Treasuries prices gained
on Thursday as bond markets showed more signs of stabilizing
after a dramatic selloff and before the Treasury's sale of $29
billion in new seven-year notes, the final sale of $99 billion
in new coupon-bearing supply this week.
Treasuries have held a firmer tone this week after being
roiled last week when Fed Chairman Ben Bernanke said the U.S.
central bank is likely to pare back its bond purchase program
later this year if the economy continues to improve.
Downward revisions to first quarter gross domestic product
data on Wednesday led some investors to speculate that a
pullback of stimulus may still be far away. Speeches from
Federal Reserve officials in recent days have also sought to
soothe the markets with statements that the removal of stimulus
is likely to be slow, and data dependent.
'The Fed has made efforts to talk the market back from those
assumptions,' that the Fed is likely to start paring its bond
purchases in September, said Ian Lyngen, senior government bond
strategist at CRT Capital Group in Stamford, Connecticut.
Federal Reserve Bank of New York President William Dudley is
scheduled to give remarks on the national and regional economy
before a briefing on labor market conditions for recent college
graduates at 10:00 a.m. (1400 GMT) while Atlanta Fed President
Dennis Lockhart is due to speak on the economic outlook at 12:30
p.m. (1630 GMT).
The Fed will buy between $4.25 billion and $5.25 billion in
notes due 2017 and 2018 on Thursday as part of its ongoing
Benchmark 10-year note yields have backed away
from 22-month highs of 2.67 percent reached on Monday to trade
at 2.49 percent on Thursday. The notes' yields nonetheless
remain significantly higher than the 2.20 percent area they
traded at before Bernanke's comments, and from 1.60 percent at
the beginning of May.
Treasuries briefly extended price gains on Thursday after
data showed that U.S. jobless claims fell in the latest week and
consumer spending rose in May.
The stronger tone may help the Treasury's sale of the new
seven-year notes on Thursday, though a weak sale of five-year
notes on Wednesday showed that jitters remain over buying the
Five- and seven-year notes are the most sensitive to Fed
interest rate policy and have been the weakest performers in the
recent selloff. The $35 billion five-year note sale saw the
lowest demand since September 2009, with a bid-to-cover ratio of
Thursday's seven-year auction, however, may be boosted by
month-end extension buying as well as from being the last of the
three auctions this week.
Traders expect the new seven-year notes to price at yields
of 1.93 percent, according to trading in the
'when-issued' market, around one basis point higher than the
notes are trading in the secondary market at 1.92 percent .
(Editing by Chizu Nomiyama)
(-------MARKET SNAPSHOT AT 9:06 a.m. EDT (1306 GMT)------- Change vs Current Nyk yield Three-month bills 0.055 (+0.00) 0.056 Six-month bills 0.105 (+0.00) 0.107 Two-year note 100-01/32 (+01/32) 0.367 Five-year note 99-28/32 (+08/32) 1.404 10-year note 93-19/32 (+15/32) 2.487 30-year bond 87-27/32 (+24/32) 3.538 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 15.00 (unch) U.S. 3-year dollar swap spread 16.75 (+0.50) U.S. 5-year dollar swap spread 17.00 (-2.00) U.S. 10-year dollar swap spread 20.75 (-0.50) U.S. 30-year dollar swap spread -7.50 (-0.50))
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