TREASURIES-Prices up on weak data, Syria risk before long weekend
* Subdued U.S. consumer income, spending support bonds
* Geo-political risk before 3-day weekend feeds bid
* Month-end portfolio-related buying aids long end
By Ellen Freilich
NEW YORK, Aug 30 (Reuters) - U.S. Treasuries prices rose on Friday, supported by subdued data on U.S. consumer income, spending and inflation, and by geo-political risk ahead of an extended holiday weekend.
Underlying concern about a possible military strike against Syria made investors wary of being short safe-haven U.S. debt, particularly over a long weekend, traders said. U.S. financial markets will be shut Monday for the Labor Day holiday.
"It's month-end. There's position squaring and concerns over potential involvement in Syria. All of that is contributing to people not wanting to be short U.S. debt at this point," said Richard Schlanger, vice president and portfolio manager for Boston-based Pioneer Investments, with approximately $20 billion in fixed income assets under management.
The benchmark 10-year Treasury note was up 2/32 in price, its yield easing to 2.755 percent from 2.766 percent late on Thursday.
Subdued data on U.S. personal income, spending and inflation in July supported Treasuries, and weakened the case for imminent cuts in Federal Reserve bond purchases which the Fed had put in place to stimulate economic growth and cut unemployment.
The data "will lead to weaker estimates of Q3 GDP growth," said Cary Leahey, senior advisor to Decision Economics in New York. "That should be bullish for bonds because it pushes up the timing for tapering bond purchases to December."
The Commerce Department reported U.S. consumer spending rose just 0.1 percent and inflation was tame in July. Economists had estimated consumer spending to have risen 0.3 percent last month.
Excluding food and energy, the price index for consumer spending rose just 0.1 percent, leaving core prices up 1.2 percent from a year ago, below the Fed's 2 percent target.
The data on the first month of the third quarter provided a cautionary note on the economy as the Federal Reserve considers cutting back on its massive bond-buying program.
"The economic numbers are not compelling enough for the Fed to taper its bond buying in September," Schlanger said. "They will continue to monitor economic activity for another quarter or so and wait for December."
The Fed will discuss the timing of such cutbacks to its bond-buying program at its Sept. 17-18 policy meeting.
Uncertainty about when the Fed will adjust its quantitative easing bond-buying and also about who will take the helm of the central bank when Fed Chairman Ben Bernanke finishes his term has left the bond market in a "quandary," said Dan Heckman, senior fixed income strategist, U.S. Bank Wealth Management in Kansas City, Missouri.
"Until there's some certainty, the bond market will be locked in a trading range between 2.70 percent and 2.85 percent on the 10-year yield," he said.
Month-end portfolio rebalancing was also supportive for bonds. Portfolios managed against benchmark indexes often buy longer-dated Treasuries around month-end.
The 30-year Treasury bond rose 15/32 in price, their yields easing to 3.692 percent from 3.718 percent late on Thursday.
In the coming week, the market will focus on nationwide surveys of the manufacturing and non-manufacturing sectors of the economy and, most importantly, on the August nonfarm payrolls report, due Sept. 6. Those will be the last set of comprehensive U.S. employment data released before the Fed's next meeting.
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