TREASURIES-U.S. debt prices slip ahead of 2-year auction

* Treasury 2-year note, bill auctions to go on as planned

* NY trading desks thinly staffed as blizzard slams city

* Analysts: healthy 2-year concession, bad auction trend

By Emily Flitter

LONDON, Dec 27 (BestGrowthStock) – The prices of U.S. Treasury debt
edged lower on Monday as a winter storm emptied some bond
dealers’ desks, while the traders who could make it to work
prepared for the week’s first Treasury note auction.

A blizzard that hit the northeastern United States on
Sunday dumped up to 20 inches of snow on New York, making it
difficult for bankers to get to their offices. For more see
[ID:N27222344].

The U.S. Treasury Department is scheduled to auction $35
billion in two-year notes at 1 p.m. (1800 GMT) and said the
auction, along with sales of three-month and six-month bills,
would proceed as planned despite the snow. [ID:WBT014306]

Liquidity was thin, however. David Ader, head of government
bond strategy at CRT Capital in Stamford, Connecticut, said
volume in the cash market registered at 22 percent of the
10-day moving average as of 8 a.m. (1300 GMT).

“If desks were down 30 percent, 40 percent anyway, they are
probably down even more today,” he said, noting that the week
between the Christmas and New Year holidays was traditionally
thin, even without a snow storm.

Ader said prices were falling because there was little to
support them.

“Today, what do we have? We have nothing,” he said. “We
have a smaller audience than we otherwise would have had
because of the weather, no key data, no Federal Reserve
speakers.”

Ader said a concession ahead of the two-year sale made
sense as well.

“If you go back four years, every one of these late
December auctions has tailed except for one,” he said. “To play
for concession here is statistically the right thing to do.”

William O’Donnell, head of U.S. Treasury strategy at RBS
Securities in Stamford, offered a brighter outlook for the
two-year auction in his morning note to clients.

“The when-issued two-year is trading around 0.72 percent
this morning, which would be the cheapest award in a two-year
auction (if achieved) since the June two-year was awarded at
0.738 percent,” he wrote, adding that the concession “may help
to buffer the negative impact of today’s poor attendance.”

The two-year note (US2YT=RR: ) was off 3/32 in price and
yielding 0.72 percent. The benchmark 10-year Treasury note
(US10YT=RR: ) was down 5/32 in price to yield 3.41 percent.

The 30-year bond (US30YT=RR: ) was off 2/32 and yielding 4.48
percent.
(Editing by James Dalgleish)

TREASURIES-U.S. debt prices slip ahead of 2-year auction