Long bond prices inch up before 30-year auction

By Emily Flitter

NEW YORK (BestGrowthStock) – Traders took profits on Thursday on short bets built up against long bonds, steadying prices ahead of the Treasury Department’s sale of $13 billion in reopened 30-year bonds.

Longer-dated debt prices outperformed other maturities, which edged lower in late-morning New York trade. Earlier data showed U.S. weekly jobless claims and September producer prices rose more than expected.

Bullish momentum could build in the Treasury market, with the coming 30-year auction the major factor holding back a rally.

“We’ve been neutral the past few days but we’re ready to go long again, maybe after the 30-year auction,” said Suvrat Prakash, interest-rate strategist at BNP Paribas in New York.

Treasury yields have fallen in recent weeks as traders piled into the market on bets that the Federal Reserve would begin another Treasuries purchase program to help stimulate the economy and create healthy inflation.

Traders also awaited Friday’s key speech by Federal Reserve Chairman Ben Bernanke and a set of economic reports on inflation and consumer sentiment.

“The focus is going to turn to a pretty event-filled day tomorrow with two economic reports, (consumer prices) and retail sales, and the chairman himself, Bernanke, is going to be speaking, and he usually has dovish things to say,” Prakash said.

The 30-year bond traded 3/32 higher in price to yield 3.82 percent, down from 3.83 percent late on Wednesday.

“It’s just profit-taking on shorts on bonds versus the rest of the curve,” said John Briggs, interest-rate strategist at RBS Securities in Stamford, Connecticut, of the 30-year’s rise.

The Treasury Department will auction $13 billion in reopened 30-year bonds at 1 p.m. (1700 GMT). Traders on Wednesday said the 30-year yield needed to be within 3.87 percent and 3.95 percent for the auction to be carried out smoothly, with good demand.

Treasury notes with maturities ranging from three to 10 years fell slightly in price. Three-year notes traded 1/32 lower in price to yield 0.60 percent, up from 0.58 percent late on Wednesday, while benchmark 10-year Treasury notes lost 3/32 in price to yield 2.44 percent, up from 2.43 percent at Wednesday’s close.

Initial jobless claims for the week rose to 462,000 from an upwardly revised 449,000. Year-over-year producer price inflation was 4 percent, compared with analysts’ expectations for a 3.7 percent reading.

“These numbers don’t fall out of the range of expectations, so they don’t move the needle too much,” said Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management in Philadelphia.

“That PPI came ahead of consensus takes a little bit out of the idea that we have dramatic concerns about deflation,” he added. “It doesn’t completely eliminate the statement that inflation is running below normal levels.”

(Additional reporting by Ryan Vlastelica; Editing by Padraic Cassidy)

Long bond prices inch up before 30-year auction