TREASURIES-Prices gain as Fed purchases Treasuries
* Fed buys $1.48 billion bonds due 2038 and 2043, prices rise * Fed to buy $2.75 bln- $3.50 bln notes due 2021-2023 later on Monday * Treasury to sell $64 bln in 3, 10, 30-yr notes this week * Fed meeting next week in focus for signs of tapering By Karen Brettell NEW YORK, Dec 9 (Reuters) - U.S. Treasuries prices rose on Monday as the Federal Reserve made the first of two separate bond purchases and as investors focused on when the U.S. central bank is likely to pare back this $85-billion-a-month buying program. The Fed bought $1.48 billion in bonds due between 2038 and 2043 and will buy between $2.75 billion and $3.50 billion in notes due 2021-2023 in a second operation on Monday. The buybacks are helping support the market even as many investors worry over the impact of when the U.S. central bank is likely to scale back purchases. Yields, nonetheless, have held relatively steady even as tapering expectations increase. Investors see any cut as initially being small and are comforted by statements that the Fed will keep rates at record lows for several more years. "I think the market is becoming a lot more comfortable with tapering," said Gary Pollack, head of fixed income trading at Deutsche Bank Private Wealth Management in New York. "The next focus is the size of the taper ... the smaller and longer is more beneficial for all financial markets," he added. The Federal Reserve will begin reducing its massive bond-buying program no later than March, according to a Reuters poll of 18 of the 21 primary dealers conducted Friday. Stronger economic data, including Friday's employment report, have led many investors and analysts to bring forward expectations on when the Fed could taper to January and many traders have begun pricing for the possibility that the Fed could act as early as next week when the Fed meets for the final time this year. Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee, sees the market as pricing in an approximate 75 percent chance of tapering this month. If the Fed does not act, traders will then be scouring the language from next week's Fed statement to see if a move in January is likely, he said. "We're almost at the point now where the market will be ready, particularly once it gets past the auctions this week, to start really thinking about interpreting the Fed," Vogel said. Benchmark 10-year notes were last up 4/32 in price to yield 2.85 percent, down from 2.88 percent late on Friday. They held near unchanged levels after an initial and brief spike to a three-month high of 2.93 percent on Friday, after data showed that U.S. employers added 203,000 jobs in November and the jobless rate fell to a five-year low of 7.0 percent. With a relatively light economic calendar, the Treasury's sale of $64 billion in new coupon-bearing debt this week will also take the spotlight. The sales will include $30 billion in three-year notes on Tuesday, $21 billion in a 10-year reopening on Wednesday and $13 billion in a 30-year reopening on Thursday. Retail sales data on Thursday will also be watched for signs of strength in consumer spending.