By Deborah Levine
Treasury prices fell Monday, pushing yields up, as the
government began from a slew of debt auctions this week, including
$8 billion in 20-year inflation-indexed securities to come.
The two-year note (UST2YR) yielded 0.85%, up 2 basis points, or
0.02%.
Ten-year note yields (UST10Y) rose 4 basis points to 2.67%. Bond
prices move inversely to their yields.
The government sold $29 billion in three-month bills at a rate
of 0.152% and $28 billion in six-month bills at a rate of
0.350%.
The sale of Treasury Inflation Protected Securities, known as
TIPS, will end at 1 p.m. Eastern time.
The Treasury Department also will put record amounts of two- and
five-year notes up for bid, reducing investors' willingness to buy
higher amounts at yields already near the lowest ever.
"We see bond markets under pressure as actual and planned
issuances surge," especially as foreign official buyers having less
ability to invest in U.S. debt, said analysts at UBS
Securities.
Treasurys stayed lower after the National Association of
Realtors said sales of existing homes rose 6.5% in December to a
seasonally adjusted annualized rate of 4.74 million. Economists
surveyed by MarketWatch predicted the pace would fall to 4.36
million.
The Conference Board's index of leading indicators rose 0.3%
last month, helped by an increase in the supply of money. It fell
0.4% in November.
Treasurys briefly gained support as companies in several
industries announced plans to slash jobs.
The dearth of job cuts may work against the bond market though,
if it leads the government to increase its already mammoth stimulus
proposal.
Construction-equipment maker Caterpillar (CAT) said it would cut
20,000 jobs, and Home Depot (HD) said it would cut its workforce by
about 7,000 jobs.
Sprint Nextel (US-S) it will eliminate 8,000 jobs in the first
three months of 2009.
Longer-term "bonds are off on the continuing realization of
stimulus funded by supply" of more debt, said Andrew Brenner,
co-head of structured products and emerging markets at MF
Global.
Also of concern to bondholders, Timothy Geithner is expected to
be confirmed as Treasury Secretary on Monday, opening up the
possibility of more details on the Obama Administration's stimulus
proposal.
Possibly a threat to bond investors "will be the formal approval
of Geithner and his coming forth with more details on the stimulus
package, for example homeowners relief, which could add to deficit
concerns and, imagine, boost equity market confidence," said David
Ader, U.S. government bond strategist at RBS Greenwich Capital.
Also on tap this week is the Federal Reserve's policy meeting.
Analysts don't expect any changes to the central banks' target
overnight interest rate between banks, already dropped to a range
of zero to 0.25% last month.
Policy makers are unlikely to say much different after they meet
on Tuesday and Wednesday, having already affirmed they are ready to
pull out all the stops to help the economy and stabilize financial
markets.
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