US Treasuries little changed

US Treasury debt prices ended little changed on Thursday, supported by safe-haven bids and concerns about the economic outlook. With stocks spending most of the session on the minus side before registering slight gains at the end of the day, investors still saw treasuries as a safe bet.
"This is how trading is going to be for a little bit of time here," said James Barnes, fixed-income portfolio manager at National Penn Investors Trust Company in Wyomissing, Pennsylvania. "Yields want to go up, but we're going to keep going back and forth. At some point it will turn, but we're not there yet."
Still, Treasury yields traded just above 50-year lows with investors hardly ready to abandon what still appears to be the safest investment in a stressful financial environment. That stress was manifest among financial stocks, especially Citigroup and Bank of America, which respectively ended 15 and 18 percent lower, after being down more than 20 percent earlier in the session.
Ironically, the dire straits of these two banks allowed stocks to end slightly higher and bonds to erase most of their gains since the stress in the banking system argued for forceful government action to stimulate the economy and steady the financial system, analysts said.
Any development raising hopes of economic recovery would tend to help riskier investments like stocks and fixed-income spread products and temper the demand for safe-haven US government debt. Also, the proposed method of economic recovery, large amounts of stimulative government spending, means the Treasury will be selling increasingly large amounts of securities to finance that spending. That increased supply would tend to weigh on Treasuries prices and nudge yields higher. So far, yields are hovering just above 50-year lows, reflecting investors' very cautious approach.
Benchmark 10-year Treasury notes were unchanged in price, yielding 2.21 percent in late trade, while two-year notes slipped 1/32, their yields edging up to 0.73 percent from 0.72 percent on Wednesday.
The five-year low for the 10-year yield, reached in December 2008, was 2.04 percent. Despite some price weakness on Thursday, analysts say yields could fall back to that area if stress in the financial system should rise and signs of economic distress intensify.
US data early on Thursday showed a rebound in the number of workers filing new claims for unemployment benefits, consistent with a US recession that has been continuing for more than a year and is shaping up to be the worst since World War Two. However, the recession has held down price pressures. Thursday's data also showed producer prices slid for the fifth straight month in December, declining by 1.9 percent.
Five-year Treasury notes slipped 2/32 in price, their yields rising to 1.37 percent from 1.36 percent late on Wednesday, while the 30-year bond rose 17/32, the yield easing to 2.87 percent from 2.89 percent on Wednesday.