TREASURIES-Bonds gain on weak data; Fed in focus
* ADP payrolls growth undershoots forecasts * ISM manufacturing index below forecast * Fed announcement to be watched for more dovish tone By Ellen Freilich NEW YORK, May 1 (Reuters) - U.S. Treasuries prices rose on Wednesday after payrolls data pointed to tepid U.S. private-sector job growth, supporting the idea of a dovish Federal Reserve statement later in the day and a subdued U.S. employment report late this week. In the latest evidence to suggest slower U.S. economic growth, the ADP National Employment Report said the U.S. private sector added 119,000 jobs in April, well below economists' expectations in a Reuters poll for 150,000,. An industry report said the pace of U.S. manufacturing growth also slowed in April. The Institute for Supply Management (ISM) said its index of national factory activity fell to 50.7 from 51.3 in March and its employment index fell to 50.2 from 54.2, boding poorly for the Labor Department's national employment report due on Friday. Economic growth picked up in the first quarter of the year, but recent data has suggested it slowed again in the spring months, a pattern seen in recent years that has become known as a "spring swoon". "We've seen the 'spring swoon' in data this year, similar to the last couple of years," said Jake Lowery, Treasury trader at ING U.S. Investment Management in Atlanta, Georgia. The statement the Fed's policy-making Federal Open Market Committee (FOMC) will issue at the conclusion of its tow-day policy meeting this afternoon "is likely to take notice of the weakness in growth, inflation and even commodity prices which impact inflation," he said. "The market expects some dovish language in today's (Fed) statement," Lowery said. "That, paired with the ADP data that came out weak, is helping to push Treasuries prices higher." Near midday and about two hours before the Fed will release its statement, the benchmark 10-year Treasury note was up 14/32, its yield easing 1.628 percent, the lowest intra-day level so far this year. The 30-year Treasury bond was up 1-4/32, its yield easing to 2.82 percent from 2.88 percent late on Tuesday. Investors' concern about the pace of economic growth was not limited to the U.S. economy. Prices of safe-haven U.S. debt opened modestly higher on Wednesday after an official purchasing managers' index showed that growth in China's manufacturing sector unexpectedly fell in April as new export orders fell. Both the domestic and global picture point to continued monetary accommodation by major central banks, including the Federal Reserve whose two-day meeting concludes with the release of a statement around 2:15 p.m. EDT (2015 GMT), analysts said. The Federal Reserve is expected to keep buying $85 billion of bonds a month. With the central bank's favored inflation gauge slipping and employment growth appearing stymied, the debate in the Federal Open Market Committee (FOMC) could begin to shift away from the prospect of reducing stimulus toward a discussion about doing more. Currently, analysts see the Fed buying a total $1 trillion in Treasury and mortgage-backed securities during the ongoing third round of quantitative easing, known as QE3. Until recently, analysts had believed the Fed would start taking the foot off the accelerator in the second half of the year. The U.S. Treasury Department said it will sell a total of $72 billion in three-, 10- and 30-year Treasuries next week in its quarterly refunding. The auctions will raise about $12.4 billion in new cash. It said it would stick with similar auction sizes as in previous quarters - with $32 billion in three-year notes, $24 billion in 10-year notes and $16 billion in 30-year bonds - but might reduce the size of future note and bond auctions, depending on the government's fiscal situation. Treasury also agreed on a structure for its planned floating-rate note issue. The first auction should happen either in the last quarter of this year or the first quarter of 2014. "The push toward issuance of floating rate securities and the anticipated decline in the quantity of coupon bonds being issued is another technical reason for the decline in rates this morning," Lowery said.
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