TREASURIES-Prices barely higher on unease ahead of Fed meeting

Thu Sep 12, 2013 4:37pm EDT

* Prices gain after Verizon's record bond, debt sale
    * $13 bln in 30-year bonds sold at high yield of 3.820 pct
    * Fed buys $3.36 bln notes due 2021-23

    By Luciana Lopez and Karen Brettell
    NEW YORK, Sept 12 (Reuters) - Prices for U.S. Treasuries
traded slightly higher on Thursday, paring early gains on
uncertainty over whether the Federal Reserve next week will
decide to slow its massive bond-buying program, which
overshadowed a 30-year debt sale that saw strong results. 
    Investors are closely focused on what action the Fed might
take when it meets on Tuesday and Wednesday on its $85 billion
in monthly purchases of Treasuries and mortgage-backed
securities, a program designed to drive down long-term interest
rates and boost the world's biggest economy.
    Until policymakers decide whether to taper those purchases,
and by how much, investors could remain wary of taking on large
positions.
    "It's just a more uncertain environment," said Kim Rupert,
managing director of fixed income analysis at Action Economics
in San Francisco.
    "Investors just don't think yields can go much lower here
unless there's some other catalyst," she added.
    Treasuries had risen earlier in the day but began losing
momentum after a sale of $13 billion in 30-year debt at a high
yield of 3.820 percent, lower than the market had expected, with
a strong direct bid.
    The sale followed similarly well-received auctions on
Tuesday and Wednesday for three-year and 10-year notes,
respectively.
    "It's interesting that all three auctions stopped through
this week," said Ian Lyngen, senior government bond strategist
at CRT Capital.
    A record $49 billion Verizon bond deal, as expected,
traded well on the open market on Thursday, with the prices
rising sharply from the price levels set in the primary market
on Wednesday. 
    "The Verizon deal rallied sharply after its issuance, and
direct bidding of Treasuries was elevated across all three
sectors. It was a good week for U.S. fixed income," Lyngen said.
    Yields have jumped since May on views the Fed will soon
scale back on its quantitative easing. The jump of more than 100
basis points has taken benchmark yields to two-year highs
recently.
    U.S. benchmark 10-year Treasury notes were last
up 3/32 in price to yield 2.903 percent, 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 2/32 in price to yield
3.849 percent, from 3.85 percent on Wednesday.    
    Although markets continue to expect the Fed will taper bond
buying at next week's meeting, the weaker-than-expected
employment report for August has reduced expectations of how
large any cut will be.
    Economists told Reuters after the jobs report they now
expect the Fed to begin paring its bond purchases 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 bought $3.36 billion in notes due 2021 to 2023 on
Thursday as part of its ongoing asset-buying program.
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