TREASURIES-Prices gain as week of massive supply nears end
* Prices gain after Verizon's record bond, supply nears completion * Weak euro zone factory output adds to bond bid * Treasury to sell $13 billion in 30-year bonds * Fed buys $3.36 bln notes due 2021-23 By Karen Brettell NEW YORK, Sept 12 (Reuters) - U.S. Treasury debt prices rose on Thursday as investors recovered from a mammoth week full of new corporate and government bond supply, before the Treasury sells $13 billion in 30-year bonds, the final sale of $65 billion in new U.S. debt this week. Treasuries have come under pressure since last Friday as investors prepared for a huge week of sales that included a record-breaking corporate bond deal by Verizon Communications Inc on Wednesday. Verizon sold $49 billion worth of bonds, eclipsing the previous investment-grade record of $17 billion by Apple Inc in April, according to IFR, a Thomson Reuters service. The completion of that sale has now allowed investors to come back to Treasuries as well as to unwind hedges entered before the sale. "The market had built in a huge concession for supply, and now the supply is eliminated and the areas that were beat up the most will recover the most," said Tom Tucci, head of Treasuries trading at CIBC, noting that 10-year notes and 30-year bonds had taken the brunt of the selling. U.S. benchmark 10-year Treasury notes were last up 10/32 in price to yield 2.89 percent, down from 2.91 percent late on Wednesday. They have fallen from a two-year high of 3.01 percent on Friday. Thirty-year bonds rose 17/32 in price to yield 3.83 percent, down from 3.85 percent on Wednesday. A drop in euro zone factory output also raised new fears over global growth on Thursday, hurting shares and adding demand for U.S. bonds. Treasuries temporarily pared price gains on Thursday after data showed that the number of U.S. jobless claims fell sharply last week, though much of the decline appeared due to technical problems in claims processing. Demand was strong for the Treasury's $21 billion 10-year note reopening on Wednesday, helped by hedge unwinds from the Verizon sale. Demand for 30-year bonds will now be tested, with many investors nervous about entering new positions ahead of the highly anticipated Federal Reserve meeting next week, where the U.S. central bank is expected to announce a reduction in its $85 billion-per-month bond purchase program. "The market's trading well and we're through the big Verizon deal, so it feels like today should go OK," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. But "with the tapering talk there could be some people just waiting to see what the number is, if there's a number." The Fed is expected to taper bond buying despite a weaker-than-expected employment report last Friday, which reduced expectations of how large any cut will be. Economists told Reuters after the latest jobs report they now expect the Fed to begin paring its purchases of Treasuries and mortgage-backed securities by $10 billion a month, less than the $15 billion median reduction in Friday's primary dealer poll and a wider poll in August. The Fed will buy $3.36 billion in notes due 2021 to 2023 on Thursday as part of its ongoing purchase program.
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