US Treasury prices slip

US Treasury debt prices slipped on Thursday as stocks pared losses in a late rebound after a report quelled rumours that insurance giant American International Group would post a big investment write-down.
The price drop was muted by the day's weak data on housing, jobs and durable goods, which supported the view that the Federal Reserve will cut interest rates next week. "As soon as the news hit that AIG (American International Group) denied the rumours, we've seen some softening in Treasuries," said Thomas di Galoma, head of Treasury trading at Jefferies & Co in New York.
Late Thursday, the CNBC cable television channel, citing unidentified sources, reported that it was untrue that AIG will report a big securities write-down. Speculation about AIG - whose shares had fallen as much as 8 percent - and other financial companies suffering hefty subprime losses intensified a day after Merrill Lynch & Co reported a $7.9 billion write-down on bad loans and investment. This anxiety, coupled with disappointing earnings results in other industries like cable television, was a drag on the overall stock market.
Stock losses, which were steep until the late spike, fostered flight-to-safety bids for low-risk US government securities, analysts said. They also helped the Treasury Department's $13 billion auction of fresh five-year notes, said Kim Rupert, managing director of global fixed-income analysis with Action Economics in San Francisco.
Although indirect bids, which include buying by foreign central banks, were below recent averages, Thursday's auction still "came in at a pretty expensive level," Rupert said. Five-year Treasury notes were down 5/32 in price for a 4.03 percent yield, up from 3.99 percent late Wednesday. Bond yields move inversely to prices.
Benchmark 10-year debt was off 8/32, yielding 4.38 percent, up from 4.35 percent late Wednesday, while the 30-year bond was down 13/32 to yield 4.68 percent, up from late Wednesday's 4.65 percent. Two-year notes, dipped 2/32 in price to yield 3.78 percent, up from 3.74 percent late on Wednesday.