March 20, 2012 / 2:32 PM / 6 years ago

TREASURIES-Prices rise as safety buying bolstered

* Stocks dip after recent run-up
    * Housing starts fall in February
    * Fed buying longer-dated Treasuries

    By Chris Reese	
    NEW YORK, March 20 (Reuters) - U.S. Treasury debt prices
rose on Tuesday, bolstered by weakness in the stock market and a
dip in housing starts in February.	
    Wall Street stocks fell as investors took a break from
buying that had pushed the benchmark S&P 500 index up in eight
of the past nine sessions. That put it at its highest point
since May 2008 and 10 percent below the record close in October
2007.	
    The Commerce Department said U.S. housing starts fell in
February, but permits for future construction jumped to their
highest level since October 2008. 	
    Benchmark 10-year Treasury notes were trading
9/32 higher in price to yield 2.35 percent, down from 2.38
percent late Monday, while 30-year bonds gained
24/32 to yield 3.44 percent, down from 3.48 percent.	
    Yields on Monday touched a 4-1/2 month high of 2.39 percent.
Treasuries prices plunged last week on signs of an improving
U.S. economy and some stabilization of Europe's debt troubles.	
    Still, yields remain historically low. Ten-year yields of
1.67 percent hit in September were the lowest in at least 60
years.	
    "It would be natural to assume that since a bottom in bonds
has been established, the smart thing to do would be to call for
a rapid 2009-style backup in long-term rates," said Steven
Ricchiuto, chief economist at Mizuho Securities in New York.	
    "Although such an outcome cannot be ruled out, it is not our
central call. Instead, our new market call is for the 10-year
note to establish a new, 2 percent to 2.5 percent trading range
and to hold this range through at least the summer," he said.	
    "We find it hard to fight the Fed," Ricchiuto said,
referring in part to the central bank's latest stimulus program,
nicknamed "Operation Twist." As part of the operation, the Fed
on Tuesday was buying $1.75 billion to $2.25 billion of
Treasuries maturing February 2036 through February 2042.	
    There was some evidence the recent rise in yields may have
run its course.	
    The share of investors who said on Monday they are long, or
owning more Treasuries than their portfolio benchmarks, rose to
25 percent from 21 percent the previous week, matching the level
seen two weeks ago, J.P. Morgan Securities' latest weekly
Treasury client survey showed.	
    In the wake of last week's sharp market sell-off, the share
of investors who said they are short U.S. government debt, or
holding fewer Treasuries than their benchmarks, fell to 15
percent, down from 23 percent the prior week. 	
    "The Treasury market appears to be in the early stages of
tracing out a new higher range. There are no signs, yet, that
this is the beginning of a sustained bear move," William
O'Donnell and John Briggs, strategists at RBS Securities in
Stamford, Connecticut, said in a note.	
    "Indeed, short Treasuries are holding in well after solid
buying and there are no positioning and sentiment imbalances
that would be typical at the beginning of a new bear phase,"
O'Donnell and Briggs said.

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