TREASURIES-Prices fall as risk appetite drives up stocks
* Market awaiting U.S. payrolls on Friday * Solid U.S. job growth seen, but Fed seen holding steady By Ellen Freilich NEW YORK, April 2 (Reuters) - Prices of U.S. Treasuries fell on Tuesday as investors favored riskier assets, driving stock market gains and hurting demand for safe-haven U.S. debt. The S&P 500 stock index pushed to within striking distance of its all-time high ahead of the influential U.S. monthly jobs report due on Friday. Even though solid job gains are expected to be recorded for March, improvement in the labor market is not expected to cause the U.S. Federal Reserve to turn down the heat on its stimulus measures. The Fed's loose monetary policy is considered particularly favorable for riskier assets. "It's a risk-on move, and we can see that in the equity market gains and in the continued desire to invest in corporate credit and high-yield bonds," Matthew Duch, portfolio manager at Calvert Investment Management, Inc. in Bethesda, Maryland, said of Tuesday's price moves. Benchmark 10-year Treasury notes slipped 10/32, their yields rising to 1.87 percent from 1.84 percent on Monday. "With long-end supply coming next week, we favor selling 10-years near 1.83 percent support given that we have a job growth figure Friday that will most likely print north of 200,000," said Tom DiGaloma, managing director at Navigate Advisors LLC. The U.S. Labor Department's monthly non-farm payrolls report on Friday will be closely scrutinized for signs of further improvement in hiring. According to the median estimate of economists polled by Reuters, a total of 200,000 jobs is expected to have been added in March. Still, Federal Reserve monetary policy is not likely to become less stimulative, given problems in the euro zone and other uncertainties that could impact U.S. growth, Duch said. The easy monetary policy, which includes buying Treasuries, is supportive for U.S. debt, but even more bullish for the riskier assets like stocks, he said. "The expectation is for the unemployment rate to be steady or fall slowly over time," Duch said. "We're not going to see any dramatic surprises that will cause the Fed to tone down what it's doing right now because it's more about the trend as a whole. Even as the U.S. economy improves, the Fed is worried about overseas events affecting our situation here." The Fed bought $1.575 billion in Treasury coupons maturing between February 2036 and February 2043 on Tuesday, according to the New York Fed. Overseas, the euro zone saw another below-50 reading in the Purchasing Managers Index on manufacturing, the 20th month in a row in which the reading indicated contraction in the factory sector. Euro zone unemployment stood at 12 percent in February. Markets will get a first look at the U.S. labor market for March with the release on Wednesday of data on private-sector hiring by payrolls processor ADP. Two Federal Reserve bank presidents are scheduled to speak during the day: Narayana Kocherlakota, president of the Minneapolis Fed, at 1 p.m. (1700 GMT), and Dennis Lockhart, president of the Atlanta Fed, at 1:30 p.m. (1730 GMT). The president of the Chicago Fed, Charles Evans, and Jeffrey Lacker, president of the Richmond Fed, will participate in a panel on monetary policy at 7:30 p.m. (2330) GMT.
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