LONDON, Nov 23 (Reuters) - U.S. Treasury prices eased in
Europe on Monday as the market braced for fresh supply of
short-dated paper worth $118 billion in a holiday-shortened
week.
SIGNS OF A POSITIVE OPEN FOR WALL STREET ALSO DAMPENING
demand for lower risk government debt. U.S. stock index futures all up nearly 1 percent.
MARKET DUE TO SHUT ON THURSDAY FOR THANKSGIVING DAY AND
with trading seen subdued, the issuance of two-year notes on
Monday, five-year notes on Tuesday and seven-year notes on
Wednesday will be a key test of investor appetite for the
massive doses of U.S. government debt.
"AHEAD OF THE HOLIDAY, THE MARKET HAS A LARGE GULP OF
Treasury supply to digest which has the potential to produce a
break-out in yields," said Lena Komileva, head of G7 market
economics at Tullett Prebon.
AT 1037 GMT, BENCHMARK 10-YEAR NOTES WERE DOWN
6/32 in price to yield 3.39 percent, while the two-year paper edged down 1/32 in price to yield 0.743 percent.
Ten-year Treasury futures slipped 8/32 to 119-10/32.
LAST FRIDAY, THE TWO-YEAR YIELD HIT AN 11-MONTH LOW AROUND
0.675 percent thanks to year-end demand. Investors closing their
books for the year tend to park their funds in the relatively
safety of very liquid short-dated government debt.
DESPITE THE SUPPLY PRESSURE, RECENT AUCTIONS HAVE SHOWN
demand for U.S. Treasuries has been generally robust.
"WE SUSPECT THAT GIVEN THE REDUCED POSITIONING, THE DEMAND
at the short-dated auctions will be robust while the 7-year
supply has been the best subscribed by the international
community of late and so may fare better than the markets
expect," said Sean Maloney, strategist at Nomura.
"In all, the pressure on the curve should not be too great
and we continue to look for the European curve to outpace its
U.S. counterpart, particularly once this slug of supply is out
of the way."
ALSO CLOSELY WATCHED IS EXISTING HOME SALES DATA DUE AT
1500 GMT where any unexpected strength will probably weigh on
bond prices. Sales expected to have risen to a seasonally
adjusted annual rate of 5.7 million last month from 5.57 million
in September.
ANOTHER FOCUS FOR MARKETS THIS WEEK IS MINUTES OF THE
Federal Reserve's Nov 3-4 meeting due on Tuesday. Investors are
keen to spot any clues on the Fed's exit strategy.
ST. LOUIS FEDERAL RESERVE BANK JAMES BULLARD SAID ON
Sunday the Fed should keep alive its mortgage-related assets
purchase programme beyond a planned end-date to give
policy-makers more flexibility as they help the economy recover
from a painful recession.
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