TREASURIES-Prices gain as market awaits U.S. jobs data later in week

Mon Nov 4, 2013 11:42am EST

Related Topics

* U.S. capital goods orders sank more than expected in
September
    * October nonfarm payrolls due Friday, GDP due Thursday
    * U.S. Treasury quarterly refunding announcement due
Wednesday

    By Luciana Lopez
    NEW YORK, Nov 4 (Reuters) - U.S. Treasury debt prices rose
slightly on Monday, retracing some of Friday's losses and
hemming yields within recent ranges as investors looked ahead to
key data later in the week as well as information on upcoming
Treasury debt sales.
    Treasuries sank on Friday after stronger-than-expected
factory activity data belied views that the economy struggled
last month in the face of a partial shutdown of the federal
government during the first half of October.
    While the shutdown was expected to drag on the economy, the
manufacturing data suggested the damage might have been
contained. Data this week may confirm that resilience or could
underscore the vulnerability of the economy.
    "There's a lot of short-term risk, depending on whether data
surprises to the upside," said Robert Tipp, chief investment
strategist at Prudential Fixed Income, in Newark, New Jersey.
    Data early in the week disappointed as orders for a wide
range of U.S.-made capital goods sank more than previously
estimated in September, a sign that companies cut their
investment plans sharply as Washington hurtled toward the brink
of default. 
    "The area of concern is non-defense cap orders ex-aircraft,"
said Scott Brown, chief economist at Raymond James in St.
Petersburg, Florida. 
    "It's pretty weak in August and September. For GDP, it's a
proxy on business and consumer spending, and it implies pretty
lackluster growth," he said.
    U.S. third-quarter gross domestic product data are due on
Thursday. Those figures will help show how strong momentum was
in the economy before the government shutdown in October, which
was sparked by Republican efforts in Congress to undermine
President Obama's signature healthcare law as a condition of
funding the government.
    And on Friday, the closely-watched October nonfarm payrolls
will be released. These key U.S. economic reports were delayed
because of the shutdown and are among the most important data
for weighing future Federal Reserve monetary policy.
    Fed policymakers want to see the unemployment rate dropping
closer to 6.5 percent from the current 7.2 percent, but
economists in a Reuters survey expect that rate to have edged up
in October to 7.3 percent.
    The Fed recently kept in place its $85-billion-per-month of
mortgage-backed securities and Treasuries buying, although a
statement from policymakers concluding a two-day meeting had a
more hawkish tinge than some had expected.
    As a result, analysts broadly expect the Fed to begin
tapering those asset purchases later than expected, perhaps well
into 2014 rather than by the end of this year.
    Treasuries could remain rangebound in coming sessions, with
investors reluctant to take on large positions until they have
more certainty on the momentum in the economy.
    "This week, neutral data should lead to a 2.50 percent to
2.75 percent trading range on 10-year notes," said Chris Bury,
head of U.S. rates trading and sales at Jefferies & Co.
    Prices for U.S. benchmark 10-year Treasury notes 
rose 7/32 in price on Monday to yield 2.596 percent, compared to
a yield of 2.62 percent late on Friday.
    The U.S. 30-year bond rose 9/32 in price to
yield 3.680 percent, compared to a yield of 3.696 percent late
on Friday.
    In addition, the U.S. Treasury on Wednesday will issue its
quarterly refunding announcement, which will lay out funding
needs for the next quarter and tell investors how much U.S. debt
will be auctioned off by the government.
    The Federal Reserve on Monday bought $3.718 billion in
Treasuries maturing August 2019 through June 2020 as part of its
ongoing stimulus program.
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