TREASURIES-Yields hit three-month highs on Fed tapering views

Thu Dec 5, 2013 2:58pm EST

Related Topics

* Yields highest since September on strong GDP, drop in
jobless claims
    * 10-year yields break above technical support at 2.85
percent
    * Fed buys $1.58 billion bonds due 2039 to 2043

    By Karen Brettell
    NEW YORK, Dec 5 (Reuters) - U.S. Treasuries yields rose to
three-month highs on Thursday after stronger-than-expected
growth and jobs data boosted views the Federal Reserve will soon
pare its bond-buying program, with investors looking to key
labor market data due on Friday.
    The U.S. economy grew at a 3.6 percent annual rate in the
third quarter instead of the 2.8 percent pace reported a month
ago, data showed.
    In addition, a report from the Labor Department showed
initial claims for state unemployment benefits dropped 23,000 to
a seasonally adjusted 298,000 last week. 
    The data came a day before the U.S. employment report, which
is expected to show that employers added 180,000 jobs in
November, according to the median estimate of 90 economists
polled by Reuters. 
    Some traders are speculating the number could come in even
stronger, with a gain of more than 200,000 jobs, and the data
could be enough for the Federal Reserve to announce a pullback
in its $85 billion-a-month bond-purchase program sooner.
    "The bond market is saying tapering is coming," said Stan
Shipley, bond strategist at ISI Group in New York.
    Benchmark 10-year Treasuries fell 5/32 in price
to yield 2.859 percent. Yields reached as high as 2.874 percent
earlier in the session, the highest since Sept. 18 and breaking
above technical support at 2.85 percent.
    Thirty-year bonds fell 3/32 in price to yield
3.910 percent.
    Many think the central bank is most likely to begin paring
purchases in March, but an increasing number are betting on
action in January as U.S. economic data improves. Some even see
an announcement at the Fed's Dec. 17-18 meeting as a
possibility.
    "There are still people interpreting that the door is still
open for a December taper," said Sean Murphy, a Treasuries
trader at Societe Generale in New York. 
    A January announcement may be more likely, however, as the
Fed may be hesitant to risk hurting liquidity heading into
year-end, he added.
    Data on Thursday was bullish for the economy, showing that
it grew faster than initially estimated in the third quarter as
businesses aggressively accumulated inventories, but underlying
domestic demand remained sluggish. 
    Atlanta Federal Reserve President Dennis Lockhart, who does
not have a vote on the policymaking committee this year or next,
warned against attaching too much importance to the data.
    "I am not prepared to interpret the revised third-quarter
number as an indication that the economy is on a much stronger
track. I think we're still on that relatively moderate growth
track," he said on Thursday. 
    The number of Americans filing new claims for unemployment
benefits also unexpectedly fell last week, a hopeful sign for
the labor market recovery. 
    The Fed bought $1.58 billion in bonds due 2039 and 2043 on
Thursday as part of its ongoing purchase program.
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