TREASURIES-Prices gain as stocks slip, Fed buys debt
* Fed buys $3.14 bln notes due 2020-2023
* Corporate rate hedging seen weighing on the market
* Treasury to sell $99 billion new supply next week
NEW YORK, July 19 (Reuters) - U.S. Treasuries prices rose on Friday as disappointing earnings from technology giants Google and Microsoft weighed on stocks, and as the Federal Reserve bought 10-year notes as part of its ongoing purchase program. Google and Microsoft both announced disappointing quarterly results, building some concerns over how far the ongoing equity rally will extend. Safe haven U.S. government bonds were also supported after the City of Detroit filed for bankruptcy on Thursday, the largest-ever municipal bankruptcy in U.S. history. "There has been constructive news for bonds over the last 20 hours or so, we had a pretty successful TIPS auction, some weakness out of Google and Microsoft, and the bankruptcy announcement out of Detroit," said Kevin Walter, head of Treasuries trading at BNP Paribas in New York. The Treasury sold $15 billion in 10-year Treasuries Inflation-Protected Securities (TIPS) on Thursday to solid demand. Bonds also gained as the Fed came back to the market for the first time since Tuesday, buying $3.14 billion in notes due from 2020 to 2023. Benchmark 10-year Treasuries yields have held near their two-week lows since Fed Chairman Ben Bernanke told a House of Representatives panel on Wednesday that the U.S. central bank plans to scale back its bond purchases later this year are not set in stone, and still depend on the strength of the economy.
The comments followed a dramatic selloff in Treasuries that sent 10-year note yields to two-year highs of 2.76 percent on July 8 on expectations the Fed would soon begin paring back its bond-buying stimulus. The 10-year notes were last up 9/32 in price to yield 2.49 percent, dopwn from 2.53 percent late on Thursday. Demand for intermediate-dated Treasuries, which are the most sensitive to Fed rate policy, will also be tested next week when the Treasury sells $99 billion in new coupon-bearing supply. This will include $35 billion in two-year notes on Tuesday, $35 billion in five-year notes on Wednesday and $29 billion in seven-year debt on Thursday. "I think the five year is a huge test. We've made so many strides in the five year that the idea that we can continue to do that and are rewarded for risking more capital at next week's sale will be a bit vote of more or less confidence in the entire economic growth story," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. Five-year notes yields have rallied from 1.63 percent on July 8 to 1.31 percent on Friday, as Fed officials have tried to ease fears over the pace in which the U.S. central bank will withdraw its record stimulus. Some traders expect that the market could come under pressure later on Friday, however, as companies sell rate locks that are used to hedge new bond sales. "On the last few Fridays is there has been a decent amount of rate lock selling from corporations, which could pressure the market," said BNP's Walter. Companies sold around $16 billion in high grade debt this week, led by big banks including Citigroup, Bank of America, and Goldman Sachs, and a similar amount of investment grade issuance is expected next week, according to IFR, a Thomson Reuters service.