TREASURIES-Bonds fall as safety appeal hit by higher stocks

* Higher stocks undermine U.S. government debt prices

* U.S. Q1 GDP revised lower, weaker than expected

* Treasury to auction $31 billion of 7-year notes
(Adds analysts’ quotes, updates prices)

By Chris Reese

NEW YORK, May 27 (BestGrowthStock) – U.S. Treasury debt prices fell
on Thursday, with benchmark notes down more than a point as
investors turned to riskier assets like stocks after China
denied it was concerned about its exposure to the euro zone.

The appetite for risk rose after the Chinese central bank
said Europe remains a key investment market for China’s foreign (Read more about foreign investment into China)
exchange reserves, soothing earlier concerns over a report the
Chinese were reviewing their euro-zone bond holdings.

Benchmark 10-year Treasury notes (US10YT=RR: ) were trading a
point lower in price, with their yield rising to 3.31 percent
from 3.20 percent late on Wednesday. The yield, which moves
inversely to prices, reached as high as 3.32 percent — the
loftiest level in a week.

“The catalyst was China’s emphatic denial that they are
considering switching out of the euro,” said Andrew Brenner,
managing director at Guggenheim Partners in New York.

Further out the curve, 30-year bonds (US30YT=RR: ) fell
1-25/32 in price to yield 4.2 percent from 4.10 percent.

While strength in equities dictated the lower prices in
Treasuries, bond traders were also pushing to cheapen bonds
ahead of the auction of $31 billion of seven-year debt on
Thursday afternoon.

Seven-year notes (US7YT=RR: ) were trading 22/32 lower in
price to yield 2.77 percent, up from 2.66 percent late on

Treasuries briefly pared losses after the U.S. government’s
estimate of first-quarter economic growth came in below
expectations. Gross domestic product expanded at a 3.0 percent
annual rate in the first quarter, below the 3.2 percent pace
initially estimated by the U.S. Commerce Department last month.
For details see [ID:nN27259780].

“It’s disappointing because everyone had expected an upward
revision. That didn’t come to fruition. This tells you that
people were not as happy last quarter as we had thought,” said
Craig Thomas, senior economist at PNC Financial Services in

New applications for state jobless benefits fell in the
latest week, suggesting some labor market recovery, albeit at a
slow pace.

Two-year Treasury notes (US2YT=RR: ) were trading 2/32 lower
in price to yield 0.86 percent, up from 0.82 percent late on

Stock Analysis

(Additional reporting by Richard Leong; Editing by Padraic

TREASURIES-Bonds fall as safety appeal hit by higher stocks