US Treasuries in retreat after chart failure
(Adds Santomero comment, recasts, updates prices)
NEW YORK, April 7 (Reuters) - U.S. Treasury debt prices sagged on Thursday after a break of a major chart barrier failed to unleash the rally bulls had been hoping for, leading them to cut long positions.
After several days of effort, buyers finally broke 4.42 percent on 10-year yields to reach 4.398 percent, but then stopped just short of last week's lows at 4.397 percent.
When no follow-though demand emerged, buyers quickly bailed out and the 10-year note <US10YT=RR> dipped 10/32 in price, lifting yields to 4.47 percent.
Some also blamed a drop in crude oil prices <#CL:>, which helped fuel a bounce in equities <.SPX> and attracted money away from bonds.
"The tech guys, black box funds and the like are looking for a short-squeeze down to 4.35 (percent), perhaps even 4.28," said one trader at a U.S. primary dealer.
"But, I have to say, the initial break of 4.42 hasn't produced the fireworks many were expecting. If anything, there's fresh selling emerging and this whole move could be a flash in the pan," he added.
Gains in other maturities were also more than erased. The two-year note <US2YT=RR> dropped 1/32, sending yields to 3.71 percent form 3.69 percent. Five-year notes <US5YT=RR> eased 5/32, lifting yields to 4.11 percent from 4.08 percent and away from resistance at 4.05 percent.
The 30-year Treasury bond <US30YT=RR> fell 24/32, taking yields to 4.79 percent from 4.74 percent.
The day's economic data were too mixed to offer much direction. Wholesale inventories rose 0.6 percent in February, while sales surprised by falling 0.4 percent, the first drop since April, 2003.
Initial claims for jobless benefit fell to 336,000 from a revised 353,000 the week before, almost matching forecasts of a drop to 332,000. The dip suggested the previous week's jump was mainly statistical noise in this very volatile series.
"There has been some modest deterioration in labor market conditions since early February," said Alan Ruskin, research director at 4CAST.
"The data is mildly bond friendly but proximity to the key 4.39-4.41 percent zone of support on the 10-year has made bond traders loathe to buy without something more substantive to hand," he added.
Unfortunately for traders there was little in the way of substantive events on Thursday. A speech by Federal Reserve Bank of Philadelphia President Anthony Santomero proved too academic to provide much impetus.
Santomero said problems with measuring the economy argued for the Fed to be slow and careful when raising interest rates. He also noted that while some measures of near-term inflation had ticked up, longer-term expectations were well contained.
On an upbeat note, he said data have historically understated national savings and therefore the current low saving rate may not restrain consumption.
There was still a question and answer session to come with Santomero.
Fed Bank of St. Louis President William Poole speaks late in the day, though the topic is the economics of higher education.
