TREASURIES-U.S. debt prices fall after 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 stress test results, quotes, updates prices)

By Emily Flitter

NEW YORK, July 23 (BestGrowthStock) – U.S. Treasury prices slipped
on Friday as stronger economic data in Europe, together with
the release of the European Union’s bank stress test results,
sent investors in search of higher-yielding positions.

Despite concern that the EU’s tests of 91 euro zone banks
were not rigorous enough, analysts reacted fairly positively to
the results, which showed only seven of the banks failing the
test. For more, click on [nSGE66M07W]

Meanwhile, data revealing economic strength in Germany and
the U.K. made safe-haven Treasuries less appealing, and a fresh
round of U.S. Treasury supply was looming.

“We have had an overshoot in terms of the drop in Treasury
yields and now we are going through a phase where people are
shortening up a bit, taking some profits, getting ready for
supply next week and wondering whether it is really Armageddon
the way the market has been pricing for,” said Josh Stiles,
bond strategist at IDEAglobal in New York.

“(European) stress tests are part of the picture that got
the overshoot going.”

EU officials began releasing stress test results after the
European markets closed. The market’s reaction was less than
exuberant; U.S. stocks (Read more about the stock market today. ) were mixed, and Treasury prices’ losses
were somewhat limited.

“Rates backed up by a couple of basis points immediately
but given that a lot have passed, the general sense is ‘Is this
something credible?'” said Bulent Baygun, head of U.S. interest
rate strategy at BNP Paribas in New York.

Treasuries followed European government debt prices lower
on 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

“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: ) slipped one basis
point, its yield unchanged at 2.94 percent.

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 7/32 lower in price with its yield
rising to 3.96 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 unchanged at 1.68 percent.

Stock Market Research

(Additional reporting by Chris Reese and Burton Frierson;
Editing by Dan Grebler)

TREASURIES-U.S. debt prices fall after stress test results