CORRECTED-TREASURIES-Prices rise as markets await central banks

(Corrects headline to say "prices rise" instead of "prices
steady")
* Fed meets Tuesday-Wednesday; ECB meets on Thursday
* Markets expect central bank action, timing uncertain

By Chris Reese
NEW YORK, July 31 (Reuters) - U.S. Treasury debt prices rose
on Tuesday as Federal Reserve officials began a two-day policy
meeting amid expectations that more central bank action to help
foster economic growth could emerge in coming weeks.
The possibility of further purchases by the Fed of
Treasuries or mortgage-backed securities, or a combination of
the two - or other accommodative steps - was supportive for
Treasuries.
"With the Fed meeting today and tomorrow and the ECB meeting
on Thursday, traders are looking for potential signs of bond
purchase programs sometime later this summer. That's supporting
the bond market right now," said Gary Thayer, chief macro
strategist at Wells Fargo Advisors in St. Louis, Missouri.
Treasuries were also supported by safe-haven buying due to
worries over the trajectory of Europe's debt crisis.
U.S. Treasuries sold off late last week when European
Central Bank President Mario Draghi spoke forcefully about
preserving the euro, which spurred a rally in riskier assets
such as stocks and the sovereign debt of nations at Europe's
geographic periphery.
More wary views of other European officials followed,
however, curbing market confidence that the ECB could deliver
decisive anti-crisis measures at its meeting this week. That put
the break on the stock market's rise and revived Treasuries.
"Ten-year yields popped up and Treasuries sold off on
Draghi's comments last week," said Steve Van Order, fixed income
strategist with Bethesda, Maryland-based Calvert Investment
Management. "Then the Germans and others came in with their
offsetting comments, and that was a little bit of a buzz kill.
"The recovery in Treasuries this week is an adjustment to
the idea that the ECB is not going to be able to come out on
Thursday and make the kinds of statement the peripheral bond
market and other risk markets would like to see," he said.
U.S. Treasuries maintained their gains despite a batch of
stronger-than-expected data - on regional manufacturing, home
prices, and consumer confidence - that typically would put
downward pressure on prices of U.S. government debt and
encourage a rise in yields.
"All eyes are on the FOMC tomorrow, the ECB Thursday, and
payrolls Friday," said Eric Stein, vice president and portfolio
manager at Eaton Vance Investment Managers in Boston.
The U.S. Labor Department is due to its closely watched
monthly jobs report for July on Friday.
Analysts said the accommodative measures that the Fed has at
its disposal are further asset purchases, a cut in the interest
rate on excess bank reserves, a time frame for potential rate
increases pushed farther out on the horizon, or mere dovish
guidance.
Market reaction to the Fed's announcement on Wednesday will
depend on how intensely hopes for more accommodation get built
into prices before the Fed and the ECB issue statements.
As investors waited for the results of the central bank
meetings, benchmark 10-year Treasury notes on
Tuesday traded 7/32 higher in price to yield 1.48 percent, down
from 1.50 percent late on Monday and not far off the record low
of 1.38 percent touched last week.
Thirty-year bonds, which bore the brunt of the
sell-off late last week, were up 14/32 to yield 2.56 percent,
down from 2.58 percent late Monday.

(Additional reporting by Ellen Freilich; Editing by Leslie
Adler)