US Treasuries finally succumb to profit-taking
Thu Jan 20, 2005 09:50 AM ET
NEW YORK, Jan 20 (Reuters) - Longer-dated U.S. Treasury debt finally succumbed to profit-taking on Thursday after their recent relentless rally, though the damage was modest compared to past gains.
The benchmark 10-year Treasury note (US10YT=RR: Quote, Profile, Research) lost 6/32 in price, lifting yields to 4.20 percent from 4.18 percent late Wednesday. In contrast, two-year yields (US2YT=RR: Quote, Profile, Research) held at 3.23 percent as investors unwound a few curve flattening trades -- bets that the Federal Reserve's rate hikes would contain future inflation and so favor longer-term debt.
So far this month, the yield curve had flattened every day but one, delivering bumper profits to those who borrowed short and lent long.
"Every now and then the profits get too tempting and are booked, which of course means unwinding some positions," said one trader at a U.S. primary dealer.
"We seem to have hit just such an inflection point overnight," he added, citing sizable Asian selling of 10-year paper and corresponding demand for two-year notes.
"But the correction hasn't been major -- if anything I'm surprised we haven't steepened further," he added. "It suggests it's too early to call the end of the flattening trend."
The spread between two- and 10-year yields widened three basis points to 98 basis points, though that remained well below its pre-Xmas level of 124 and a world away from last year's highs around 245.
The 30-year bond was particularly badly hit by profit-taking, though that merely reflects the out-sized scale of its recent gains. The bond (US30YT=RR: Quote, Profile, Research) dropped 20/32 in price, while its yield rose to 4.69 percent having closed at a 10-month low of 4.66 percent on Wednesday.
The five-year note (US5YT=RR: Quote, Profile, Research) was relatively steady with its yield ticking up to 3.72 percent from 3.71 percent.
There were no early U.S. economic data but the Philadelphia Fed releases its manufacturing survey for January at midday. Median forecasts are that its main activity index rose to 26.4 from 25.4 in December, while there will be the usual interest in the price and employment indices.
Adding to the long list of recent Fed speakers, Fed Bank of St. Louis President William Poole will give a speech on "The Outlook: Mississippi and the Nation" around 10:10 a.m. (1510 GMT).
Later, Fed Bank of San Francisco President Janet Yellen speaks on "The U.S. Economic Outlook: A Monetary Policymaker's Perspective" around 3:45 p.m. (2045 GMT).
Generally, Fed officials have sounded a little more concerned about the risks of inflation but not so much that the market has begun to fear a quicker pace of tightening.
Futures have already priced in a quarter point hike at each of the next three policy meetings, taking fed funds to 3.00 percent. There is much uncertainty about the path of rates afterward with the market seeing no more than 3.75 percent by year-end but some economists tipping 4.25 percent or higher
è una sindrome acuta di alterata percezione estetica e morale 
