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TREASURIES-Yields dip after weak NY manufacturing data

Daniel Bases
Tuesday, 18 Feb 2014 | 10:41 AM ET

NEW YORK, Feb 18 (Reuters) - U.S. Treasury yields held in tight ranges on Tuesday, hemmed in as a weaker-than-expected regional manufacturing report and the biggest ever one-month decline in homebuilder confidence nibbled away at confidence in the strength of the U.S. economic recovery.

The benchmark 10-year U.S. Treasury price gyrated after the New York Federal Reserve's Empire State general business conditions index slowed in February, although a forward-looking component of the index appeared to be more optimistic.

U.S. homebuilder confidence meanwhile plunged by 10 points to 46 in February from 56 in January, the first time since May that the reading was below the key 50 mark. Readings below 50 mean more builders view market conditions as poor than favorable.

This latest homebuilder sentiment reading has been dampened by the severe winter weather that has shrouded U.S. economic data in uncertainty and led U.S. Federal Reserve officials to view data with some skepticism until at least March.

A slowing down of the Fed's process for removing monetary stimulus, known as tapering, however is not currently expected.

"There is not much in the docket today. We are trying to see if it is weather-related or not, so there is a lot of noise in the data and that's leaving the market in a stalemate," said one fixed income trader in New York.

"There was a pop and then sellers came in, particularly in the long-end," the trader said, referring to Treasury buying in the immediate reaction to the data. Yields move inversely to prices.

Manufacturing in New York State slowed in February after hitting a 20-month high in January. The general business conditions index fell to 4.48 from 12.51. Economists polled by Reuters had expected a reading of 9.0.

However, the index of business conditions six months ahead rose to 38.99 in February from 37.51 in January.

Treasury prices have since regained lost ground. The 10-year Treasury is trading up 7/32 of a point in price, driving the yield down to 2.726 percent. The 30-year long bond also traded up 7/32 of a point in price, moving the yield down to 3.686 percent