Treasuries up, yields sag

US Treasuries' prices rose on Tuesday as traders focused on weakening US consumer confidence and ignored stronger-than-expected data showing that US home prices last year climbed the most since 2005. The 30-year US Treasury bond made the strongest gain. Insurance companies and pension funds with extended investment horizons were likely buyers of the 30-year Treasuries, according to rate-strategist Boris Rjavinski at UBS in Stamford, Connecticut.
"Pensions and insurance companies have long-dated liabilities," Rjavinski said. "The long bond is one of the best matches for them." After falling on Monday, the 30-year bond was up 27/32 of a point in price following the release of The Conference Board's index of consumer confidence. The index declined in February. Economists had expected a slight gain.
That left the 30-year bond's yield at 3.665 percent, compared with 3.701 percent on Monday and a session low on Tuesday of 3.657 percent touched after the consumer confidence index was published. The benchmark 10-year US Treasury note rose 12/32 in price to yield 2.705 percent, down from 2.745 percent on Monday. The session low was 2.7 percent. Shorter maturities were mixed, with more modest gains or small price declines.
The market's reaction to the drop in the confidence index might be overdone and was unlikely to diminish broad expectations that interest rates will rise, market strategists said. TD Securities strategist Gennadiy Goldberg blamed the index decline on a fall in expectations among survey takers that is likely to be reversed. "We look for the removal of debt ceiling uncertainty and a recovery in equity prices to help support the expectations component of the index in future months, with confidence continuing to show modest improvement," Goldberg said.
Treasury prices increased early in New York trading and reacted little to the release of the S&P/Case-Shiller composite index posting a better-than-forecast 0.8 percent rise in single-family home prices during December from November. The index drawn from 20 metropolitan regions also showed a 13.4 percent year-on-year gain in home prices, which S&P Dow Jones Indices said was the best annual increase in eight years. The US Treasury Department on Tuesday sold $32 billion of 2-year notes at a high yield of 0.340 percent.