TREASURIES-Prices climb after 30Y note sale, Wall St dip

By Ellis Mnyandu NEW YORK, Nov 12 (Reuters) - U.S. Treasury debt prices rose on Thursday as a record $16 billion 30-year bond auction rounded off a successful week for a massive refunding program that signaled no let up in appetite for U.S. government debt. Although the 30-year bond auction drew a response just short of the strong response seen with Monday's 3-year note auction and Tuesday's sale of benchmark 10-year notes, analysts said investors were relieved that the Treasury auctions went relatively smoothly. The auctions were part of this week's $81 billion federal debt refunding. "I think there's just relief that it's out of the way," said Carl Lantz, interest rate strategist at Credit Suisse in New York. "With that out of the way I think we see the market recover a bit and we flatten out." Weakness in U.S. stocks spurred some safe-haven buying and sentiment on bonds also got a boost from economic data that supported the view of a slow U.S. economic recovery and bets that the U.S. Federal Reserve will stick to its near-zero rate policy. But with the strength of the economic recovery still somewhat uncertain, investors have shown a willingness to put money more in the shorter-dated part of the yield curve, betting the U.S. Federal Reserve will keep interest rates near zero. The price of the two-year Treasury note , which is more sensitive to expectations of changes in the federal funds rate, was up 2/32, putting the yield at 0.81 percent, down from 0.84 percent late on Tuesday. The U.S. bond market was closed on Wednesday in observance of Veterans Day. The price on 30-year Treasury bonds was up 12/32, while the yield, which moves inversely to their price, was 4.39 percent, down from 4.41 percent late on Tuesday. Benchmark 10-year notes were yielding 3.44 percent, down from 3.48 percent on Tuesday. The 30-year yield is about 3.58 percentage points higher than the two-year yield and 0.95 percentage point higher than the 10-year yield. "With a little bit of a weak stock market, there is a bit of a reversal of the so-called risk trade," said David Dietze, chief investment strategist at Point View Financial Services in Summit, New Jersey. "You have got a very large spread between two-years and 30-years (yields) ... and there is resistance among traders to let that spread go longer." In the latest auction, overall bidding for the new 30-year bonds was the lowest since May, while the yield cleared at 4.469 percent, more than 3.5 basis points higher than traders had expected. For details, see This week's refunding raised roughly $43 billion in new cash to help the U.S. government pay for its stimulus program and financial bailouts. The Treasury has faced a drop in tax receipts due to the recession. Data from the U.S. Labor Department showed that weekly jobless claims fell to 502,000 in the week ended Nov 7, compared with a revised 514,000 in the prior week. Analysts polled by Reuters forecast 510,000. For more, see On the housing front, mortgage applications rose 3.2 percent on a jump in refinancing requests, according to an industry report. However, loan demand to buy homes fell, suggesting the sluggishness in housing market. In other news, the U.S. government began fiscal 2010 with a record shortfall for the month of October, right after posting a record $1.4 trillion budget gap for all of the 2009 budget year, the Treasury Department said on Thursday. With $81 billion in note auctions out of the way, the bond market will refocus on upcoming economic data and Treasuries could do better. The Reuters/University of Michigan preliminary November consumer sentiment report is due at 0955 ET (1455 GMT) on Friday. The sentiment index is expected to read 71.0, down slightly from October's reading of 70.6. The government will release data on the September U.S. trade gap and October import and export prices. (Additional reporting by Chris Reese and Emily Flitter; Editing by Diane Craft) (([e-mail]; [phone]; Reuters Messaging:[e-mail])) Keywords: MARKETS BONDS ------------------- MARKET SNAPSHOT AT 1621 EST (2121 GMT) ------------------- Dec T-Bond 118-31/32 (-13/32) Dec 10-Year note 118-31/32 (- 3/32) Change vs Current Nyk yield Three-month bills 0.0625 (+0.00) 0.063 Six-month bills 0.1575 (-0.01) 0.159 Two-year note 100-12/32 (+ 2/32) 0.811 Five-year note 100-18/32 (+ 6/32) 2.255 10-year note 99-14/32 (-1-25/32) 3.442 30-year bond 101-25/32 (+12/32) 4.392 --------------------------- SWAPS SPREADS ------------------------ Nov 12 Nov 10 Nov 9 Nov 6 Nov 5 Nov 4 Nov 3 2-YR 32.00 33.00 33.25 34.00 35.25 36.00 36.75 3-YR 37.50 37.50 43.25 44.75 45.00 45.75 46.00 5-YR 31.75 33.00 35.00 36.75 37.25 37.00 37.50 10-YR 11.50 13.75 14.75 16.00 16.25 16.75 17.75 30-YR -13.50 -12.50 -11.75 -10.50 -10.00 -10.25 -9.25 (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. 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