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TREASURIES-U.S. bond prices steady, Dec. Fed rate hike still likely
November 16, 2015 / 10:05 PM / 2 years ago

TREASURIES-U.S. bond prices steady, Dec. Fed rate hike still likely

* NY Fed manufacturing data negative for 4th straight month

* Paris attacks unlikely to keep Fed from Dec. rate increase

By Tariro Mzezewa

Nov 16 (Reuters) - U.S. Treasuries prices were mostly steady on Monday as investors maintained the view that the Federal Reserve will raise interest rates in December, reducing the flight to safe government debt that investors expected in the wake of Friday’s attacks in Paris.

Treasury futures prices initially had risen when they reopened on Sunday evening following the attacks, with analysts citing uncertainty as a catalyst for a risk-off trade. But U.S. equity markets, which opened lower, clambered into positive territory over the course of Monday’s session on Wall Street as investors saw little long-term economic impact from the attacks.

The limited buying of Treasuries had to do with “the calculation that this is still unlikely to move the Fed from a December hike,” wrote Aaron Kohli, interest rates strategist at BMO Capital Markets in New York.

Yields on benchmark 10-year Treasury notes and 30-year bonds briefly fell after the New York Fed’s Empire State Manufacturing Survey was negative for the fourth consecutive month, momentarily driving investors into government debt.

Treasuries prices had risen on Friday, with yields hitting their lowest in a week, as unexpectedly weak U.S. retail sales and producer data reinforced the view of modest economic growth and tame inflation.

While Friday’s data dialed down some expectations of a December rate hike, a number of Fed officials, including Cleveland Fed President Loretta Mester, signaled that a rate increase is still likely, barring a sharp deterioration in the economy and financial markets.

Analysts and investors are looking to Tuesday’s U.S. consumer price data for further clues about a December interest rate increase.

“Between now and Fed meeting, every piece of data matters and can cause movement in the markets,” said Stanley Sun, interest rate strategist at Nomura Securities International in New York.

Ten-year Treasuries were up 3/32 in price to yield 2.27 percent, down from 2.28 percent late on Friday. The 30-year bond was down 5/32 in price to yield 3.06 percent.

Late in Monday’s session, weekly data from the U.S. Commodity Futures Trading Commission showed big speculators had dramatically pared their bets against 10-year Treasury futures in the latest week.

The net short position reported by hedge fund and other speculative investors fell by more than 127,000 contracts to just under 37,000. That swing, the largest in five years, effectively retraced the previous week’s massive increase in net short positions, which had been the largest in two-and-a-half years. (Reporting by Tariro Mzezewa; Editing by Dan Grebler)

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