TREASURIES-Hold firm in Asia, 7-year auction eyed

* Treasuries hold firm after previous day's tumble

* Focus on $24 bln 7-year note auction later in the day

* Fed's purchase programme seen offering some price support

* Five-year bonds sag after poor auction

By Satomi Noguchi

TOKYO, March 26 (Reuters) - U.S. Treasuries held firm in most maturities on Thursday in Asia, recovering some of the previous day's losses with investors looking ahead to the last leg of this week's $98 billion in bond issuance.

The Treasury is set to auction $24 billion of seven-year notes later in the day, the second sale of the maturity since 1993 after the first auction last month.

Analysts said the market was drawing support from the Federal Reserve's debut purchase of government bonds on Wednesday. The Fed bought $7.5 billion in Treasuries maturing in the next seven to 10 years.

However, analysts also warned the market was likely to see a tug-of-war between expectations for the Fed's bond buying, and fears that investors may not have sufficient appetite for the surging debt supply to finance the ballooning U.S. deficit.

Five-year Treasury notes extended losses after a record large auction of the maturity on Wednesday was met with below-average demand, despite strong demand at an auction of two-year notes on Tuesday.

"The market has mixed sentiment. On the one hand there are expectations for the Fed's bond purchases, and on the other there are concerns about investor demand," said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC.

"The market still respects the Fed's credibility, so yields are likely to be kept low," he said.

The benchmark 10-year note rose 5/32 in price to yield 2.781 percent, down about 2 basis points from late U.S. trade.

The 10-year yield climbed to its highest point since last Wednesday, when the Fed's surprise announcement of its purchase programme triggered the biggest one-day drop in yields in more than two decades.

The seven-year note edged up 2/32 in price to yield 2.337 percent, down 1 basis point.

The five-year note fell 22/32 in price to yield 1.846 percent, up 3 basis points.

Concern over burgeoning Treasury issuance to fund the government's costly stimulus package and bailout programmes came to the forefront early on Wednesday, after Britain suffered its first failed government bond auction since 2002. [ID:nLP456926]

But analysts said the incident did not have a lasting impact on the bond market, while the spike in New Zealand yields was also having little influence on U.S. Treasuries.

sources from reuters,Editing by Chris Gallagher

Dow 2 days 5 minutes chart

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A batch of better-than-expected economic data induced broad-based buying for the first part of the session, but the upbeat tone fell apart as stocks pushed through intraday support levels and a Treasury auction produced disappointing results. However, an underlying bid emerged late in the session, setting off a rally in the last few minutes of trading.

The latest durable goods orders data and new home sales figures both turned out to be better than expected.

February durable goods orders increased 3.4%, marking the first time in six months that orders increased. Excluding transportation, orders increased 3.9%. Economists expected respective declines of 2.5% and 2.0%.

February new home sales increased 4.7% month-over-month to an annualized rate of 337,000. Economists predicted a 2.9% decline.

The afternoon's selling effort gained momentum after the S&P 500 failed to find support at the 818 level, which had provided intraday support in the early going. Selling intensified after weak demand for a government auction of 5-year Treasuries led to a jump in yields. The disappointing auction followed an auction of Gilts, or British debt securities, by the United Kingdom that failed to attract enough buyers.

The weak auctions suggest investor appetite for government debt carrying low interest rates is waning, which will bring future auctions into closer focus. As such, tomorrow's auction of 7-year notes now has a much higher level of importance.

Sellers took the stock market to a loss of 1.8%, but a late, broad-based rally effort helped stocks close the session with a solid gain.

source from yahoo and google

Feb durable goods

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