U.S. Treasuries hesitant, eyes on core inflation
NEW YORK, Dec 22 (Reuters) - U.S. Treasuries prices hesitated either side of flat on Wednesday, leaving traders resigned to more aimless range trading ahead of potentially market moving inflation data due later in the week.
The benchmark 10-year note <US10YT=RR> was idling at 4.17 percent having wandered between 4.16 percent and 4.22 percent so far this week. Traders were watching to see if March 10-year futures <TYH5> could clear resistance at 112-08, in which case the 10-year cash yield could move back to 4.12 percent.
The rest of the market was equally quiet, with two-year notes <US2YT=RR> flat at 3.03 percent and the five-year <US5YT=RR> stuck at 3.56 percent. At the very long-end, the 30-year bond <US30YT=RR> was hovering around 4.80 percent.
The yield curve paused in its recent flattening trend, with the spread between two- and 10-year yields at 114 basis points, just shy of major resistance at 110 basis points.
The only major U.S. data of the day was the final version of third-quarter gross domestic product (GDP), though that was largely of historic interest.
"The modest revision to final Q3 GDP and the core PCE deflator did not have a lasting impact on the market," said Brian Robinson, an analyst at 4CAST.
"There really isn't much to get excited about. Day traders may try to push prices lower, but trading conditions could frustrate even well-located shorts," he added.
GDP growth was revised up a notch to an annualized 4.0 percent from an initial 3.9 percent, with the change entirely accounted for by a downward revision to imports.
Since the trade deficit swelled to a record in October, analysts assume net exports will be more of a drag on growth this quarter.
Still, bond bulls were not happy that the core personal consumption expenditures deflator was revised up in the third quarter, albeit to a still subdued 0.9 percent annualized.
The upward revision could stir speculation that the November core PCE reading, due on Thursday, will come in higher than expected. Analysts have been assuming it would hold steady at an annual 1.5 percent and any anything higher could well pressure bonds.
The core PCE is the Federal Reserve's favored measure of inflation and its benign performance has been a big comfort for holders of fixed-income debt.
Thursday also has readings on consumption, business investment, home sales, jobless claims and consumer sentiment. Any surprises could shake the market from its recent lethargy, particularly as liquidity will be lacking ahead of an early 2:00 p.m. close