TREASURIES-Prices slip ahead of stress test results

* Questions arise over EU bank stress tests’ rigor

* UK GDP shows largest jump in four years

* German business sentiment reaches three-year high

* Next week’s supply of $104 billion in debt weighs
(Adds detail on supply, European economic data, quote)

By Emily Flitter

NEW YORK, July 23 (BestGrowthStock) – U.S. Treasury prices slipped
on Friday, but a broader sell-off was curbed by uncertainty
over whether the European Union’s bank stress tests would offer
any clarity on damage to the private sector from the recent
sovereign debt crisis.

EU officials are to release the results of tests of 91
eurozone banks at 12 p.m. EDT (1600 GMT), an event investors
were initially expecting to be calming to financial markets.

But as news emerged that only a portion of the banks’
assets were examined, markets took a wait-and-see approach.
Wall Street stocks were mixed ahead of the results. For more,
click on [ID:nLDE66M1EC]

“This is a surprise in the sense that the scope of the
stress test is limited to a certain portion of the banks’
risk,” said Christian Cooper, senior rates trader at Jefferies
& Co. in New York. “It’s going to be a little bit less
insightful or meaningful than the already watered-down
expectations.”

Treasuries followed European government debt prices lower
after brighter economic data in the region. Gross domestic
product in Britain grew by the largest amount in four years,
while a measure of business sentiment in Germany hit a
three-year high.

“The idea that Europe’s going to lead us into a recession
is being questioned,” said Rick Klingman, managing director of
Treasury trading at BNP Paribas in New York.

The benchmark 10-year note (US10YT=RR: ) was off 3/32 in
price to yield 2.95 percent, a up from 2.94 percent late on
Thursday.

Coming auctions were another factor keeping pressure on
Treasury prices. Treasury traders are facing $104 billion in
new coupon supply next week. The Treasury Department will hold
three days of auctions of two-year, five-year and seven-year
notes starting on Tuesday.

After dropping a full point earlier in the trading day, the
30-year bond (US30YT=RR: ) was 12/32 lower in price with its
yield rising to 3.97 percent from 3.95 percent on Thursday.

Two-year Treasury notes (US2YT=RR: ) were unchanged in price
on Friday to yield 0.58 percent. The five-year note yield
(US5YT=RR: ) was 1.69 percent, up from 1.68 percent at Thursday’s
close.

Investment Basics

(Editing by Dan Grebler)

TREASURIES-Prices slip ahead of stress test results