Asian CBs good for 45% of the big 10UST auction as well.
Reuters
Treasuries Slip on Disappointing Auction
Thursday February 12, 5:50 pm ET
By Ros Krasny
CHICAGO (Reuters) - Longer-dated U.S. Treasuries prices eased on Thursday after the final leg of the U.S. government's quarterly debt auction was not as strong as hoped and the Treasury reported a budget deficit for January.
Fed Chairman Alan Greenspan's second day of congressional testimony cemented Wednesday's impression that the central bank is in no hurry to raise interest rates.
The benchmark 10-year Treasury note could not muster the strength to move through resistance at a yield of 4.00 percent, especially after the auction results.
The $16 billion in new 10-year notes went at a high yield of 4.06 percent with a bid-to-offer ratio of 2.00, above the 1.83 average for 2003 but not as strong as that achieved in this week's three-year and five-year sales.
Still, indirect bidders -- mostly foreign central banks -- fed their appetite for U.S. debt, snapping up some 45 percent of the notes. That was the highest since the Treasury started releasing the data in May 2003.
Greenspan, in Thursday's Senate appearance, said the United States remained attractive to investors.
Dealers reason that Asian central banks, which have bought large amounts of dollars recently through currency intervention, need to move the proceeds into Treasuries.
But other potential buyers, concerned about the huge U.S. budget deficit, expect Treasury prices to fall amid a flood of supply later in the year.
The Treasury on Thursday reported a $1.39 billion budget deficit for January. Economists had forecast a small monthly surplus. Four months into fiscal 2004, the accumulated deficit stood at $130.06 billion, up 33 percent from a year ago.
"This was the first time that the January budget has been in deficit since 1992," said Steven Wood, economist with Insight Economics.
The benchmark 10-year note (US10YT=RR) fell 5/32 for a yield of 4.05 percent, up from 4.04 percent late Wednesday. Dealers said the 10-year note faced strong resistance to a move below 4.00 percent.
The 30-year bond (US30YT=RR) slipped 15/32 to yield 4.93 percent, up from 4.90 percent. Five-year notes (US5YT=RR) were steady at a yield of 3.05 percent.
Two-year Treasury note yields (US2YT=RR) were also steady, at 1.71 percent.
Earlier, the market mostly brushed aside soft jobs and retailing data.
January retail sales fell 0.3 percent, weaker than expected. But excluding a soft autos sector, sales rose 0.9 percent, the biggest monthly gain since September.
"January retail sales are still up an annualized 0.9 percent over their fourth-quarter level. This is a solid start to the first-quarter data," said Brian Wesbury, chief economist with Griffin Kubik Stephens & Thompson.
Initial weekly jobless claims rose unexpectedly for a second straight week, but the Bureau of Labor Statistics again attributed the move to temporary weather-related lay-offs.
For the week ended Feb. 7, claims were 363,000 vs. an upwardly revised 357,000 a week earlier. The median forecast had been for a drop to 345,000.
The number of Americans collecting jobless benefits continues to drop sharply after a program to extend benefits to the long-term unemployed expired recently. |
