TREASURIES-U.S. bond prices rise on Fed buy-back, weaker stocks
* Prices rise in light data day in heavy economic data week * Fed buys $4.7 bln government debt in two operations * U.S. sells $104 bln in T-bills at lower interest rates * ADP jobs, ISM services, new home sales, Beige Book on tap By Karen Brettell and Richard Leong NEW YORK, Dec 3 (Reuters) - U.S. Treasuries prices rose on Tuesday, bolstered by two bouts of bond purchases from the Federal Reserve and a slump in Wall Street stocks partly on worries about the Federal Reserve reducing stimulus sooner than some traders think. The bond market recouped some of Monday's losses on moderate trading ahead of Friday's employment report for November. Some investors are bracing for another solid job increase, which would pave the way for the Fed to begin paring back its $85 billion-a-month quantitative easing program, known as QE3. The U.S. central bank is now seen by most analysts as likely to begin reducing purchases at its March meeting, but some think that could be brought forward to January, or even later this month, if employment data comes in strong. "A particularly strong report would begin to bring forward tapering expectations, and certainly January would become much more in play," said John Canavan, fixed income analyst at Stone & McCarthy Research Associates in Princeton, New Jersey. Canavan added, however, that he sees a Fed tapering in December as unlikely. "We don't think that one particularly strong release would be enough to tip their hand," he said. Economists polled by Reuters forecast U.S. employers likely added 180,000 workers in November following a 204,000 increase in October. Some traders were surprised by the strength in the October figure in the wake of a 16-day government shutdown that led to the furloughs of hundreds of thousands of federal workers and contractors. The Labor Department will release its November payroll report at 8:30 a.m. (1530 GMT) on Friday. There were no significant U.S. data releases on Tuesday, offering a reprieve for traders from an otherwise heavy week. "Data is pretty light today. It will pick up later in the week with a slew of data culminating in payrolls on Friday," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. The ADP employment report; new home sales figures; services activity readings from the Institute for Supply Management and the Fed's Beige Book on regional economic conditions will be released on Wednesday. Thursday's releases will include the first revision on third-quarter gross domestic product and jobless claims for last week. Treasuries were supported on Tuesday by two scheduled Fed buy-backs, the latest QE3 purchases aimed at holding down long-term borrowing costs with the goal of lowering unemployment and averting deflation. The central bank bought $940 million of notes due from 2024 to 2031, followed by $3.73 billion of notes due from 2019 to 2028. These Fed purchases, together with Wall Street stock prices sliding for a third straight session, renewed bids for Treasuries, analysts said. On the open market, benchmark 10-year notes last traded up 8/32 in price to yield 2.772 percent, down 3 basis points from late on Monday. The 10-year yield came within 3 basis points of the two-month high set more than a week ago on Monday. Thirty-year bonds rose 14/32 in price to yield 3.835 percent, down 2 basis points from Monday's close. The 30-year yield rose 5 basis points the prior session. Analysts expect Treasury yields to hold in a tight range in the foreseeable future. "Treasuries are going to stay in a narrow range into year-end. They are fully priced right now," said Anthony Valeri, fixed income strategist at LPL Financial in San Diego. On the supply front, the Treasury Department sold a combined $104 billion in one-month, three-month and six-month bills at lower interest rates than last week's auctions. The Treasury postponed the sales of three-month bills and six-month bills to Tuesday from Monday due to an error that occurred during a test of its auction system.
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