TREASURIES-Prices end slightly lower after volatile day

* Prices flat as stock gains temper safety bid

* 30-year bond yield below 4 percent at one point

* Trading erratic; focus on stocks

By Emily Flitter

NEW YORK, May 21 (BestGrowthStock) – U.S. Treasury debt prices
swung in and out of positive territory on Friday before ending
slightly lower, as gains in the U.S. stock market dampened
demand for safe-haven U.S. government debt.

Major stock indexes swung wildly — losing, then gaining
more than 1 percent for the day. Treasuries tracked stocks
closely and an early rally was erased.

“Equities … (went) positive on the day,” said Rick
Klingman, managing director of Treasury trading at BNP Paribas
in New York. Once the 10-year yield broke through 3.18 percent,
a psychologically significant level, Treasuries capitulated, he
said.

But volatility remained the order of the day as traders
struggled to square positions before the weekend at the end of
a week when riskier assets skidded and safe-haven Treasuries
rallied.

“You’ve got weekend risk. Who knows what policy makers may
or may not decide to do over the weekend?” said John Brady, a
senior vice president at MF Global in Chicago.

As investors worried that economic growth would slow in the
second half of the year, demand for safe-haven debt drove
30-year bond yields down from 4.34 percent late last week to
just below 4 percent early Friday.

Ten-year notes, which yielded 3.46 percent late last week,
fell early in the trading day to below 3.18 percent. Late on
Friday, the 10-year note (US10YT=RR: ) was off 2/32 in price to
yield 3.22 percent. The 30-year Treasury bond (US30YT=RR: )
finished unchanged in price to yield 4.09 percent.

Fear that global fiscal tightening would kill the economic
recovery had pummeled equity and commodity prices during the
week and caused investors to pay up for safe-haven U.S.
government debt.

On Friday, some of the stocks that took the biggest
beatings — shares of banks and basic materials companies —
did better and led the stock market higher.

But stocks struggled to build on those gains, until a rally
in the last minutes of trade drove stocks firmly higher.

“The growth trade is being unwound,” said Thomas di Galoma,
head of fixed-income rates trading at Guggenheim Securities in
New York.

John Spinello, chief fixed-income technical strategist at
Jefferies & Co in New York, said the flight to safety this week
put Treasuries at the “bull extreme.”

That pointed to erratic trading ahead, with technical
resistance on the 10-year yield now at 3.17 percent to 3.15
percent and support during any correction placed at 3.23
percent to 3.25 percent, Spinello said.

RBS analysts said Treasuries movements remain “highly
correlated with movements of risk assets, with
intermediate-term momentum still bullish for Treasuries.”

Resistance for the 30-year bond yield below 4 percent lies
at 3.95 percent, the RBS analysts said.

Two-year notes (US2YT=RR: ) were down 3/32, their yields
rising to 0.77 percent from 0.72 percent.

Five-year notes (US5YT=RR: ) were off 3/32 in price and
yielding 2.01 percent.

Stock Basics

(Additional reporting by Ellen Freilich; Editing by Leslie
Adler)

TREASURIES-Prices end slightly lower after volatile day