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TREASURIES-Prices edge up on weak global data; Alibaba deal caps gains
November 20, 2014 / 8:23 PM / 3 years ago

TREASURIES-Prices edge up on weak global data; Alibaba deal caps gains

(Adds comment, updates prices)

* U.S. core CPI rises, helps yields rise early

* China, Europe data weigh on market

* Alibaba bond deal limits gains in Treasuries

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 20 (Reuters) - U.S. Treasury debt prices inched higher on Thursday as investors sought the safety of government bonds amid concerns about global growth following weak manufacturing data from China and Europe.

Data showed underlying U.S. inflation pressures increased last month, initial weekly jobless claims dipped and existing home sales strengthened, initially helping yields edge higher. But data out of Europe and China outweighed the impact of the sturdy U.S. data.

The 10-year and 30-year Treasury yields rose from the day’s lows after data showed the core consumer price index rose 0.2 percent, the largest increase in five months. A separate report showed initial U.S. jobless claims stayed below the 300,000 threshold for a tenth straight week.

“This one snapshot of inflation doesn’t undo all the potential headwinds in China, Japan and Europe, and certainly we’ll wait and see if this becomes a trend rather than the exception,” said Tyler Tucci, Treasury strategist at RBS Securities in Stamford, Connecticut.

In afternoon trading, U.S. benchmark 10-year Treasury notes were up 4/32 in price to yield 2.33 percent, down from 2.36 percent late Wednesday. U.S. 30-year Treasury bonds were up 8/32, yielding 3.05 percent compared with 3.07 percent at Wednesday’s close.

A well-received auction of $13 billion in U.S. 10-year Treasury Inflation-Protected Securities (TIPS) on Thursday also boosted gains in Treasuries, especially after the higher-than-expected inflation data. Strong foreign demand of 62.4 percent helped the TIPS auction achieve a solid 2.57 bid-to-cover ratio.

“The recent underperformance of TIPS seems to have started to attract some interest, especially given a better-than-expected CPI number this morning,” said George Goncalves, head of U.S. rates strategy at Nomura Securities in New York.

“However, we would not get overly excited just yet as the path for overall inflation is still lower into the winter months, in our view,” he said.

The gains in Treasuries, however, were capped by Alibaba’s $8 billion corporate bond deal, which has attracted about $55 billion in orders. Asset managers have been selling Treasuries to make way for the new Alibaba bond supply in their portfolios. (Additional reporting by Michael Connor; editing by Bernadette Baum and G Crosse)

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