NEW YORK: US Treasury prices dipped on Tuesday after data showed the economy grew at its quickest pace in 11 years in the third quarter, and before the government was due to sell $35 billion in new five-year notes.
The Commerce Department revised higher its estimate of gross domestic product growth to a 5.0 percent annual pace from 3.9 percent reported last month, citing stronger consumer and business spending.
A gauge of business investment plans, however, was unexpectedly flat in November, suggesting a slowdown in economic growth after a brisk expansion over the last two quarters. The Commerce Department said non-defense capital goods orders, excluding aircraft, a closely watched proxy for business spending plans, was unchanged after a downwardly revised 1.9 percent drop in October.
"This is spectacularly strong growth," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. "But the fact that durable goods orders are slowing the way they are is a little concerning, and doesn't bode positively for (fourth quarter) growth numbers."
Benchmark 10-year notes were last down 6/32 in price to yield 2.18 percent, up from around 2.17 percent before the data.
Further data due on Tuesday include the Thomson Reuters/University of Michigan's final December reading on consumer sentiment at 9:55 a.m (1455 GMT). New home sales data for November as well as the November reading for personal income and spending are expected at 10 a.m. (1500 GMT).
Improving economic data has raised expectations the Federal Reserve is closer to raising interest rates next year. That has hurt short and intermediate-dated debt, which are the most sensitive to interest rate increases, relative to 30-year bonds.
Relatively higher yields may help the Treasury sell the new five-year notes on Tuesday, and $29 billion in seven-year debt on Wednesday, though thin trading during the Christmas holiday week could damage demand.
The Treasury saw solid demand for $27 billion in two-year notes on Monday, which sold at the highest yield in three-and-a-half years.
The Treasury will also sell $13 billion in reopened two-year floating rate notes on Tuesday.
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