TREASURIES-US debt prices hover near unchanged

* Philly Fed manufacturing index highest since April 2005

* Resistance for 10-year yield at 3.5 to 3.6 percent

* PIMCO to invest in “equity-related” securities
(Updates prices, comment)

By Ellen Freilich

NEW YORK, Dec 16 (BestGrowthStock) – U.S. Treasuries prices hovered
near unchanged levels on Thursday as the newly popular view
that the economy will do better next year competed with the
appeal of lower bond prices and higher yields.

Treasuries opened higher, offering yields apparently
attractive enough to draw buyers. They then slipped at
mid-morning following news that a mid-Atlantic regional
manufacturing index — from the Federal Reserve Bank of
Philadelphia — reached its highest level in December since
April 2005.

By noon, those losses were mainly erased, however. While
the Philadelphia Fed headline index rose more than expected,
its composition was mixed; new orders increased while shipments
and employment declined.

Yields are at more appealing levels, but buyers are
challenged by the “overriding factor in favor of a better
economy,” said John Spinello, chief fixed-income technical
strategist at Jefferies & Co. The latest weekly figures from
the Investment Company Institute showed the first outflows in
two years for taxable bond funds.

The benchmark 10-year note (US10YT=RR: ) was unchanged, its
yield at 3.52 percent, while the 30-year bond (US30YT=RR: ) was
also steady, yielding 4.59 percent.

“The markets are very volatile. Mortgage hedging is a
factor. So is talk that PIMCO is making a move to equities,”
said Thomas di Galoma, head of fixed-income rates trading at
Guggenheim Securities in New York.

PIMCO Total Return Fund, the world’s biggest bond fund at
$256 billion, said on Thursday it may start investing up to 10
percent of its assets in “equity-related” securities, such as
convertibles and preferred stock.

Data on weekly U.S. jobless claims and November housing
starts left little impression on bonds, strategists said.

“All the attention is focused on the Treasury bond market
after some more promising signs that bonds are finally finding
price support,” said Alan Ruskin, global head of currency
strategy at Deutsche Bank in New York.

“The layer of resistance from 3.5 percent to 3.6 percent on
10-year yields is proving difficult to breach,” he said.

Ruskin said equities, commodities, and emerging market
currencies all need 10-year yields to stabilize to establish “a
solid base for real money buying early in the new year.”

But Spinello said there was “a definite shift away from
Treasuries into risk despite the Fed’s intentions remaining on
the accommodative side.”

No sharp corrections to the market’s recent sell-off have
emerged, he observed.

On the economic data front, Ruskin said U.S. housing starts
are “essentially flat-lining at very low levels for now, and
residential investment will provide little impetus for GDP in
the near-term, without being a major drag either.

“The jobless claims data were also consistent with a slow
improvement in labor market trends and with the idea that the
November employment report overstated weakness,” he said.
(Editing by Dan Grebler)

TREASURIES-US debt prices hover near unchanged