TREASURIES-Prices gain as Fed, payrolls loom

Fri Jul 26, 2013 9:22am EDT

Related Topics

* Analysts say Fed could address tapering next week
    * Nonfarm payrolls for July could clarify labor market
health

    By Luciana Lopez
    NEW YORK, July 26 (Reuters) - Prices for U.S. Treasuries
rose slightly on Friday, with investors reluctant to stake out
large positions ahead of key events next week that could help
clarify when the Federal Reserve might slow or stop its massive
asset-buying program.    
    "I just think they're waiting for more clues about what's
going to happen. A lot of people want to know, is tapering going
to start in September?," said Dimitri Delis, interest-rate
strategist at BMO Capital Markets in Chicago.
    But he cautioned that the Fed's decision will depend on
incoming economic data.
    "I think if you start getting some weaker numbers, you might
see some of these expectations being scaled back," Delis said.
    The benchmark 10-year note rose 6/32 in price on
Friday to yield 2.555 percent, from 2.577 percent late on
Thursday.
    The 30-year bond gained 15/32 in price on Friday
to yield 3.618 percent, from 3.646 percent late on Thursday.    
    Yields for both 10- and 30-year Treasuries rose for the
week, retaking almost all the ground lost in the previous week.
    With little economic data or news to goad yields to new
highs or lows this week, many investors have sat on the
sidelines, waiting for information on the biggest question in
Treasuries at the moment: When will the Fed pause its $85
billion per month buying in Treasuries and mortgage-backed
securities?
    Fed officials, including Chairman Ben Bernanke, have hinted
that the bank is looking at pulling back the purchases as the
economy improves.
    As a result, yields have risen more or less steadily since
May, even as Fed speakers have hastened to reassure markets that
a slowing in the so-called quantitative easing purchase program
does not mean the Fed will hike rates any time soon.
    The Fed holds a policy meeting next week, with a statement
set for the second and final day, Wednesday.
    Depending on what the Fed says, bearish trendlines, in place
since around early May, could get broken, said William
O'Donnell, head Treasury strategist with RBS Securities in
Stamford, Connecticut.
    "If the trendlines are broken, that would turn my
medium-term price momentum bullish," he said. "I think if those
trends break, 2.25 (percent yield on the 10-year note) is a
shoo-in."
    A major factor in Fed policy decisions will be the health of
the U.S. labor market. Nonfarm payrolls figures for July, due
next Friday, could help investors gauge whether the jobs market
is strengthening enough for the Fed to wean the economy off QE.
    Policymakers want to see the unemployment rate closer to 6.5
percent than its current 7.6 percent.
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