TREASURIES-U.S. bond prices rise before 30-year bond sale
* U.S. to sell $13 billion in 30-year bonds at 1 p.m. * Fed's Yellen sees 3 pct U.S. GDP in 2014 - magazine * U.S. jobless claims fall to lowest level since November * Fed to buy $600-$900 million in longer-dated Treasuries By Richard Leong NEW YORK, Jan 9 (Reuters) - U.S. Treasuries prices rose on Thursday as some investors were lured by the current yields on longer-dated issues even as the recent wave of upbeat economic data have signaled yields might climb higher. Perceived dovish comments from European Central Bank President Mario Draghi lifted German Bund prices, which in turn helped boost U.S. government debt, analysts and traders said. The market's rebound from Wednesday's losses complicates a $13 billion auction of 30-year Treasury bonds, the last leg of this week's $64 billion in coupon-bearing supply, analysts said. A bulk of the price rise in longer-dated Treasuries stemmed from the notion that the Federal Reserve might raise short-term interest rates from their near zero level sooner than some traders had previously thought. These curve "flatteners" bet shorter- and medium-term yields would rise faster than long-dated ones, even after the Fed decided in December to pare its monthly purchases of Treasuries and mortgage-backed securities by $10 billion to $75 billion. "The front-end of the yield curve might test the Fed's resolve to keep short-term rates low if unemployment falls at its current pace," said Mike Cullinane, head of Treasuries trading with D.A. Davidson in St. Petersburg, Florida. According to CME FedWatch, short-term U.S. interest rates futures implied traders now assign a 64 percent probability for the first Fed rate hike as early as April 2015, compared with 63 percent on Wednesday. Financial markets will receive a broad snapshot of the U.S. labor conditions on Friday at 8:30 a.m. (1330 GMT) when the Labor Department releases its December payrolls report. U.S. employers have picked up their hiring at the end of 2013, helped by the housing recovery and rising exports. Wednesday's ADP private-sector payrolls report and Thursday's jobless claims figures supported the view of ongoing improvement in jobs growth. The U.S. Labor Department said first-time filings for unemployment benefits totaled 330,000 last week, which was the lowest weekly level since late November. The ADP National Employment Report showed private jobs grew by 238,000 in December, the biggest monthly rise in 13 months. Economists polled by Reuters forecast employers likely added 196,000 jobs, down from 203,000 in November, while the jobless rate likely held at five-year low of 7.0 percent. With this improving labor backdrop, Janet Yellen, set to take over as the head of the Federal Reserve from Ben Bernanke in February, is "hopeful" that U.S. economic growth will improve in 2014 to reach 3 percent or more and persistently low inflation will move up toward the central bank's target of 2 percent, according to a Time magazine interview released Thursday. Yellen's ECB counterpart Mario Draghi rang a more cautious note on the eurozone economy where inflation is sagging further into a "danger zone" below 1 percent. Draghi signaled at a press conference the ECB is ready to do more to prevent further slowing in price growth. In the wake of Draghi's remarks, benchmark 10-year Treasury notes last traded up 2/32 price to yield 2.984 percent, down 1 basis point from late on Wednesday. Just last week, the 10-year yield hit a near 2-1/2-year high of 3.041 percent, according to Reuters data. Amid a wave of curve flatteners, the yield spread between five-year and 30-year Treasuries shrank to 2.12 percent, the tightest level in four months. In "when-issued" activity, traders expected the upcoming 30-year bond supply to sell at a yield of 3.894 percent , near the level set in December which was the highest at a 30-year auction since July 2011. Meanwhile, the Fed planned at 11 a.m. (1600 GMT) to buy $600 million to $900 million in Treasuries that mature in 2024 to 2031, which is part of its expected $40 billion purchase of U.S. government debt in January.
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