LONDON, Jan 31 (Reuters) - U.S. Treasury debt prices advanced in Europe on Thursday after the Federal Reserve pledged to keep economic stimulus in place to bring down unemployment.
The U.S. central bank left its monthly $85 billion bond purchase programme in place, arguing that the support was needed even as it indicated a recent stall in economic growth was likely to be temporary.
"It looks like the Fed is not going to be in a hurry to do anything on its policy stance and that's supporting the market, especially the front end," a trader said.
The benchmark U.S. 10-year T-note was last up 3/32 in price to yield 1.98 percent, pulling away from a nine-month high of 2.037 percent hit on Wednesday. Month-end buying as investors readjust their portfolios and bond buybacks by the Fed were keeping Treasuries firm although significant falls in the benchmark yield were seen as unlikely before Friday's market-moving non-farm payrolls report.
Although no one had expected a radical change in the Fed's policy stance, some market players had been worried it could rejig its statement to reflect uneasiness among some Fed board members about its asset-buying programme.
"We expect the Fed will continue its bond-buying programme - mortgage-backed securities and Treasuries - until late 2013 ... That said, the Committee might begin earlier to gradually decrease the monthly purchase amount from the current $85 billion in order to ensure a smooth transition," UniCredit strategists said in a note.
The focus is now moving to January payrolls data, due on Friday, as an unexpectedly strong improvement in the job market could spark speculation that the Fed may wind up its bond-buying programme earlier than expected.
Analysts polled by Reuters expect U.S. employers added 160,000 new jobs this month, up marginally from 155,000 new positions added in December. The unemployment rate is expected to be unchanged from December at 7.8 percent.