Treasuries fall

US Treasury debt prices fell on Wednesday as less gloomy US data and hopes for bold steps to combat Europe's debt crisis kept a lid on demand, though an afternoon stocks slide tempered losses. Bonds also got a bid after the Treasury saw good demand for its $35 billion, five-year note auction.
Some investors had feared that the new five-year notes risked seeing reduced interest as they are not being targeted by the Federal Reserve in its new round of bond purchases. The Fed plans to buy notes with maturities of six years or more, and sell notes debt maturing in three years or less, in an effort to lower long-term rates to stimulate new lending and buoy the struggling economy.
Five-year notes "are kind of the Fed-free zone in a certain respect," said Lou Brien, market strategist at DRW trading in Chicago. However "the auction was very well bid," The Treasury will sell $29 billion in seven-year notes on Thursday, its final auction of the week.
The strong sale of five-year notes helped Treasuries prices pare earlier losses, though they remain lower on the day as investors wait on further news over whether Greece will receive aid to stave off default. Competition from higher-yielding corporate bond supply also exerted upward pressure on Treasury yields, analysts said. Nearly $5 billion in corporate debt have been sold this week, bringing the month's total above $50 billion, according to IFR, a unit of Thomson Reuters.
Expectations that some fund managers might rotate cash into bonds from stocks before quarter-end also curbed market losses, traders and analysts said. With the ever-changing financial predicament in Europe, it is unlikely that Treasury yields will rise much further from current levels, analysts said.
Treasuries were also hurt earlier on Wednesday after stronger-than-expected data on business spending, suggesting the US economy is not slowing as much as some had feared, traders said. Benchmark 10-year note yields were last down 10/32 in price to yield 2.01 percent, down from 2.07 percent earlier, which was the highest in a 1-1/2 weeks. The 30-year Treasury bond fell 16/32 in price to yield 3.09 percent, after earlier rising as high as 3.15 percent.