TREASURIES-U.S. bond prices up on Yellen's views, before 30-year supply

Reuters

* Yellen's Fed Chair nomination hearing in focus

* Yellen backs current easy Fed policy to support economy

* U.S. to complete refunding with $16 bln 30-year bond sale

* Fed to sell $13 billion 10-year TIPS next week

By Richard Leong

NEW YORK, Nov 14 (Reuters) - U.S. Treasury debt prices rose

on Thursday as views from Federal Reserve Vice Chair Janet

Yellen at her Senate panel hearing on her nomination to head the

U.S. central bank were perceived as bond friendly, stoking bids

for government debt.

The Fed Chair nominee told the Senate Banking Committee that

while the central bank's bond purchase program will not go on

forever, it is important not to end it prematurely since the

economy is still fragile.

"Today is all about Yellen and whether she stays on the

dovish side," said Jason Rogan, managing director of Treasuries

trading at Guggenheim Partners in New York.

After Yellen's hearing, investors will contend with the last

leg of this week's $70 billion quarterly refunding with a $16

billion sale of 30-year bonds at 1 p.m. EST (1800

GMT).

The 30-year supply follows back-to-back solid auctions of

three-year and 10-year notes on Tuesday and Wednesday.

Investors view Yellen, along with out-going Fed Chairman Ben

Bernanke, as a strong proponent of the Fed's current ultra-loose

monetary policy. They reckon a Fed under Yellen's leadership

will continue this stimulative stand with the goal to lower

unemployment and to raise inflation.

"I believe that supporting the recovery today is the surest

path to returning to a more normal approach to monetary policy,"

Yellen said in prepared remarks released late Wednesday.

Since her prepared remarks to the Senate Banking Committee

hearing into her nomination on Thursday were known, traders were

tracking Yellen's replies to questions on quantitative easing

and the interest rate outlook from the Senate panel.

"She has always been on the dovish side. It's not surprising

she says that quantitative easing is still necessary," said

Sharon Stark, chief fixed income strategist at D.A. Davidson in

St. Petersburg.

Analysts also attributed the market gains largely to traders

exiting bets on lower prices spurred by an encouraging jobs

report last Friday, rather than a wave of bullish bets on

Treasuries.

On the open market, benchmark 10-year Treasury notes

were 13/32 higher in price with a yield of 2.702

percent, down 5 basis points from late on Wednesday.

Thirty-year bonds were up 27/32 after gaining

more than 1 point. Their yield fell to 3.779 percent, down 5

basis points from Wednesday's close.

Longer-dated yields have retraced more than half of the

October jobs data-related increase, with the 10-year yield

testing its 50-day moving average in the 2.68 percent area.

DATA TAKE BACKSEAT

With the focus on the Yellen hearing, traders brushed off

Thursday's spate of domestic data that suggested a U.S. economy

in need of continued aggressive stimulus from the Fed.

The U.S. trade deficit grew to $41.78 billion in September,

compared with a revised $38.70 billion in August, while the

number of Americans filing jobless benefits for the first time

totaled 339,000 last week, more than the 330,000 forecast by

analysts, government data showed.

The Fed on Thursday bought $3.171 billion in Treasuries

maturing from November 2020 to August 2023 as part of its latest

stimulus efforts.

While the central bank sticks to its bond-buying program to

support the economic recovery, the government has been selling

debt to finance its spending.

It is unclear how the 30-year bond sale will fare given the

uncertainty around the Yellen hearing.

In "when-issued" activity, traders expected the bond issue

due in November 2043 to sell at a yield of 3.779

percent. This would be higher than the 3.758 percent at the

30-year bond reopening held in October.

The Treasury Department said it sell $13 billion of reopened

10-year Treasury inflation indexed notes next

Thursday. That 10-year TIPS issue last traded at

a yield of 0.502 percent, down over 5 basis points on the day.

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