TREASURIES-Prices rise, Fed meeting this month in focus

Fri Jan 17, 2014 1:46pm EST

Related Topics

* Treasuries rangebound as data meets expectations
    * Tapering in focus for Fed January meeting
    * Fed buys $2.81 bln notes due 2022 and 2023

    By Karen Brettell
    NEW YORK, Jan 17 (Reuters) - U.S. Treasuries prices rose on
Friday as economic data was largely as expected and as trading
volumes were light before a long holiday weekend.
    The bonds have held in a relatively tight range this week,
after a weaker-than-expected employment report last Friday led
benchmark 10-year yields to fall from the near the 3 percent
level to a range between 2.82 percent and 2.92 percent.
    Market participants are now focused on whether that report
is likely to lead the Federal Reserve to hold its monthly bond
purchase program at current levels when it meets later this
month, or continue to reduce the size of purchases.
    "There is still some feeling that they may pause if the
economic data looks somewhat weaker, that sentiment surfaced
after the employment report but since then we've seen better
economic numbers and the beige book released this week was quite
upbeat," said Jim Kochan, chief fixed income strategist at Wells
Fargo Funds Management in Menomonee Falls, Wisconsin.
    The U.S. economy continued to grow at a moderate pace from
late November through the end of 2013, with some regions
expecting a pick-up in growth, the Fed said on Wednesday in its
Beige Book report of anecdotal information on business activity
collected from contacts nationwide. 
    Strong economic releases since the payrolls report,
including better than expected retail sales on Tuesday, are seen
as supportive of the Fed's plan to continue to pare purchases.
    "The mix of data that we've seen over the last week, even in
light of the disappointing employment report, all suggest that
the Fed is going to continue with its tapering schedule and drop
another $10 billion at the end of January," said Ian Lyngen,
senior government bond strategist at CRT Capital in Stamford,
Connecticut.
    The U.S. central bank cut the size of its monthly bond
purchase program by $10 billion to $75 billion at its December
meeting.
    The Fed bought $2.81 billion in notes due 2022 and 2023 on
Friday as part of its ongoing purchase program. It will purchase
debt next Tuesday through Friday. The market is closed on Monday
for the Martin Luther King Day holiday.
    Benchmark 10-year notes were last up 4/32 in
price to yield 2.830 percent, down from 2.845 percent late on
Thursday.
    Bonds showed little reaction to data on Friday that U.S.
housing starts fell less than expected in December, and
industrial output rose by 0.3 percent in December, as expected.
 
    U.S. consumer sentiment also slipped in its first January
measure, weighed by lowered expectations among lower- and
middle-income families, a survey showed.
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