TREASURIES-Prices rise as subdued data supports low-rate outlook
* Aug durable goods orders rise 0.1 pct after 8.1 percent July drop
* New home sales rose in August, still near lowest levels of 2013
* Treasury to sell $35 billion in five-year notes
By Ellen Freilich
NEW YORK, Sept 25 (Reuters) - U.S. Treasuries prices rose on Wednesday for the fourth session in a row as data on new home sales and on orders for long-lasting manufactured goods last month supported the outlook for accommodative monetary policy from the Federal Reserve.
Orders for long-lasting U.S. manufactured goods rose just 0.1 percent in August after plummeting 8.1 percent in July. Orders for non-defense capital goods excluding aircraft, seen as a proxy for business spending, rose 1.3 percent after falling 1.4 percent in July and slipping 1.0 percent in June.
Meanwhile, new home sales rose in August, but not nearly as much as they fell in July. Seasonally-adjusted annualized sales remained near the lowest levels of 2013.
None of the data would move the Fed's hand closer to trimming its large-scale purchases of Treasuries and mortgage-backed securities, said Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund.
"We need sustainable, improved economic metrics from here to significantly increase the odds for a taper," Stith said, referring to possible reductions in the central bank's so-called quantitative easing program. "That's because the Fed explicitly said in its recent statement that the 'tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.'
"A pick-up in monthly payroll job growth and other economic metrics is needed just to counter-balance the financial chokehold of higher interest rates," Stith said. "That's the biggest reason Treasuries prices have been rising in recent days and will continue to do so," Stith said.
In the next few trading sessions, buying by portfolio managers - who need to extend the maturities of their portfolios to match key benchmarks by month- and quarter-end - could also be supportive for Treasuries, Stith added.
On Wednesday, benchmark 10-year notes rose 6/32 in price, their yields easing to 2.637 percent from 2.66 percent late on Tuesday. Thirty-year bonds rose 2/32, their yields easing to 3.67 percent from 3.68 percent late on Tuesday.
The gains occurred ahead of the Treasury's $35 billion five-year note auction at 1 p.m. (1700 GMT).
"Treasuries are anticipating 5-year supply today and the possibility that the new 5-year notes could be re-opened into an older seven-year issue," said Tom di Galoma, head of fixed-income rates sales at ED&F Man Capital in New York.
Hedging before some major corporate issuance could account for small price moves in the Treasury market as the hedges are placed ahead of the deals and lifted afterwards.
"Given the relatively thin market and light volume conditions, the potential is for a further pullback as portfolio types switch out of seasoned holdings to make room for these new deals," said Kenneth Logan, rates analyst at IFR, a Thomson Reuters unit.
Treasuries prices have risen and yields have fallen since the Federal Reserve decided to put off unwinding any of its monetary accommodation until it had more confidence in the sustainability of the still-subdued economic recovery.
At its policy meeting last week, the Fed decided not to trim its large-scale asset purchases, citing strains in the economy from tight fiscal policy and higher mortgage rates. Fewer asset purchases would put downward pressure on bond prices and upward pressure on yields.
As part of its ongoing efforts to foster economic activity and lower unemployment, the New York Fed purchased $3.158 billion in Treasury coupons on Wednesday with maturities ranging from November 15, 2020 through August 15, 2023.
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