TREASURIES-Bonds tumble as Fed refrains to buy long debt (Reuters)

Wed Jan 28, 2009 5:57pm EST

By Richard Leong

NEW YORK, Jan 28 (Reuters) - U.S. Treasury debt prices tumbled on Wednesday after the Federal Reserve refrained, for now, from buying long-dated government debt, disappointing investors who hoped for a bold move to help a fragile economy.

The Fed's perceived caution led to a sharp sell-off in Treasuries, particularly among long-dated issues. The 30-year bond resumed its recent price decline, falling for seven of the past eight sessions. The 30-year yield briefly broke above 3.46 percent, the highest rate since Dec. 1.

"What was disappointing to some traders in the market is that...they are talking about buying them but not actually doing it," said Stuart Spodek, co-head of U.S. fixed income with the BlackRock Fixed Income Portfolio Management Group in New York.

The price drop in the benchmark 10-year note <US10YT=RR> was less severe, falling 25/32 at 109-9/32. Its yield, which moves inversely to price, was 2.67 percent, up from 2.58 percent late on Tuesday.

The Federal Open Market Committee, the Fed's policy-setting group, at the close of its two-day meeting on Wednesday, said: "The Committee is also prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in the private credit markets." For more, see
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more: http://www.reuters.com/article/bondsNews/idUSN2853750020090128