Treasuries fall on unexpected rise in home sales
Thu Mar 23, 2006
NEW YORK, March 23 (Reuters) - U.S. Treasury debt prices turned lower on Thursday on an unexpected rise in existing home sales last month which reinforced expectations that the Federal Reserve will raise interest rates at least two more times.
Still, traders said action was light and is expected to remain subdued until after the Federal Reserve's policy meeting early next week.
February sales of existing homes rose 5.2 percent to a seasonally adjusted annual rate of 6.91 million units, according to the National Association of Realtors. That compared with economists' expectations for 6.5 million units and January's upwardly revised 6.57 million unit pace.
"Overall, it's a strong number, so I'm not surprised to see the market trading off," said Mary Ann Hurley, a bond trader with D.A. Davidson & Co. in Seattle. "As long as you still have strength in housing, the consumer is going to hang in there, and I would expect the Fed to continue to tighten."
Benchmark 10-year notes <US10YT=RR> fell 56/32 for a yield of 4.73 percent against 4.71 percent on Wednesday.
Two-year notes <US2YT=RR> turned 1/32 lower for a yield of 4.76 percent, compared with 4.75 percent late on Wednesday.
Five-year debt <US5YT=RR> turned lower as well, trimming 3/32 in price for a yield of 4.72 percent, compared with 4.69 percent on Wednesday.
Thirty-year bonds <US30YT=RR> shed 7/32 for a yield of 4.74 percent against 4.72 percent on Wednesday.
Earlier, the market ignored first-time weekly jobless claims data, which showed 302,000 people sought unemployment insurance for the first time in the week ended March 18, compared with economists's expectations of 305,000 and the prior week's 313,000.
Traders said that despite the downward movement on Thursday, the market is likely to remain in a wait-and-see mode until the Fed meets on Monday and Tuesday.
"The market is just sitting back and position-squaring, waiting for what the Fed policy statement says" on Tuesday, said one bond trader with a primary dealer.