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Thu Oct 25, 2012 5:52am EDT
LONDON, Oct 25 (Reuters) - U.S. benchmark yields struck a five-week high on Thursday on signs of UK economic recovery and after the Federal Reserve stuck to its monetary policy, prompting some Treasury investors to book profits. * Treasuries extended the previous day's falls, following British government bonds lower after third-quarter UK growth beat forecasts. * The Fed, as expected, held off taking any further easing steps on Wednesday after it launched a new round of bond purchases last month. But some investors took this as an opportunity to push Treasury prices lower to make way on their books for a $29 billion seven-year note sale later in the day. * "We had the UK GDP data which was stronger than expected but 95 percent of the selling (in Treasuries) had already taken place before the data as a strong figure was anticipated," a trader said. * "We got nothing new from the Fed last night, which is what was expected, but maybe the guys (were) a bit too complacent being long and so are scaling back ... It will be very interesting to see when New York comes in if guys buy this dip." * Benchmark 10-year T-note yields were last at 1.84 percent, their highest since Sept. 17 after breaking the 200-day moving average of 1.805 percent. * The 30-year T-bond yield was up 3.5 bps to 2.989 percent. The long-dated bonds sharply underperformed shorter-dated maturities on Wednesday on some disappointment that the Fed did not announce an extension of Treasury purchases beyond year-end. * "We expect the Fed to announce a continuation of Treasury purchases beyond year-end and ... therefore expect the steepening of the curve to reverse," Barclays Capital strategists said in a note. * Some in the market were also keeping an eye on the U.S. presidential race which is too close to call. A victory by Republican candidate Mitt Romney is seen by many as negative for bonds, as it could spur a rally in shares on hopes of business-friendly policies. It could raise doubts on the Fed's commitment to aggressive easing as many Republicans oppose quantitative easing. - Tweet this
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