TREASURIES-Yields rise in choppy trading, T-bills hurt by debt ceiling
* Prices fall as ADP close to expectations * Fed to buy TIPS, notes in two operations * One-month T-bill yields rise on debt ceiling fears By Karen Brettell NEW YORK, Feb 5 (Reuters) - U.S. Treasuries prices fell on Wednesday, erasing some earlier gains in choppy trading, after an employment report came in close to analysts' expectations, giving few new clues as to the strength of Friday's highly anticipated jobs report. U.S. private employers added 175,000 jobs in January, close to analysts' expectations, the ADP National Employment Report showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 180,000 jobs, near the 185,000 jobs that Friday's non-farm payrolls report are expected to have added in January. "I think that most participants are looking for a stronger number, mainly so they can buy at higher yields," said Thomas di Galoma, co-head of fixed-income rates at ED&F Man Capital in New York. "People are buying duration, buying out the curve because they aren't getting the selloff they anticipated." Benchmark 10-year Treasuries yields have fallen to 2.64 percent, from more than 3 percent at the beginning of the year as investors flee emerging market assets and stocks tumble, increasing the safety demand for U.S. government debt. The 10-year notes have struggled to stay below yields of 2.60 percent, however, as investors that expect yields could rise on stronger economic momentum are reticent to buy at the lower yields. Weakening economic data has increased speculation that the Federal Reserve may slow or cease reductions in its bond purchase program if the economy worsens, though many see data as needing to moderate considerably from current levels to alter the Fed's plans. The Fed last week cut its monthly bond purchases by $10 billion, to $65 billion. It will conduct two operations on Wednesday, including purchasing between $0.85 billion and $1.15 billion in Treasuries Inflation-Protected Securities (TIPS) due from 2018 to 2043, and between $2.5 billion and $3.0 billion in Treasury notes due 2019 to 2021. Treasuries bill yields, meanwhile, continued to rise on Wednesday as investors were wary of buying debt that is exposed to default as the U.S. bumps up again against the debt ceiling. Washington is due to reinstate a limit on its borrowing at the end of this week and Treasury Secretary Jack Lew said the administration could use accounting measures to stay under the new cap until the end of February. Yields On-the-run one-month Treasuries bills that come due on Feb. 27 <US1MT=RR 4> rose to 13 basis points on Tuesday, the highest since October, when the debt ceiling was last an issue, and up from half a basis point two weeks ago. The U.S. Treasury also said on Wednesday it will sell $70 billion in new coupon-bearing debt next week, but that it may cut auctions sizes at its next quarterly refunding. Next week's sales will include $30 billion in three-year notes, $24 billion in 10-year notes and $16 billion in 30-year bonds. The Treasury added that reopening sized for future auctions of the government's new two-year floating rate notes are likely to be between $12 billion and $15 billion.
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