* Fed seen reassuring bond purchases in place into 2014
* U.S. private job growth slows in October - ADP
* U.S. 7-year note auction sets for lowest yield since May
* TIPS breakevens narrow a tad after in-line CPI data
By Richard Leong
NEW YORK, Oct 30 U.S. Treasuries prices rose on
Wednesday on expectations the Federal Reserve will assure
investors it will stick to its current pace of bond purchases
into 2014 in a bid to bolster an economy hurt by the recent
16-day government shutdown.
Recent data signaled the critical labor and housing sectors
had already slowed even before the shutdown, bolstering the view
the policymakers are unlikely to reduce the Fed's $85 billion
monthly purchases of Treasuries and mortgage-backed securities.
The Federal Open Market Committee, the central bank's
policy-setting group, is scheduled to release a statement at 2
p.m. ET (1800 GMT) after a two-day meeting.
Anxiety about another budget showdown between President
Barack Obama and Republican lawmakers early next year bolstered
support for bonds, whose yields have been hovering at
three-month lows since last week.
"People are only seeing bad stuff on the horizon. We have to
see what the Fed says later and how dour its outlook might be,"
said Thomas Roth, executive director of U.S. government bond
trading at Mitsubishi UFJ Securities in New York.
What has troubled the Fed is the protracted sluggishness in
the labor market despite three rounds of quantitative easing and
nearly five years of near-zero interest rates.
Payroll processor ADP said on Wednesday U.S. companies added
130,000 workers in October, 20,000 fewer than economists had
forecast. Just four months earlier, they expanded their payrolls
by about 190,000.
Pessimism over U.S. growth at least in the next six to nine
months, due to the lingering effect from the government shutdown
and possibly more brinkmanship in Washington, should stoke solid
bids at the upcoming seven-year note sale, traders said.
"This thinking will help the seven-year auction," Roth said.
The U.S. Treasury will sell $29 billion in seven-year debt
at 1 p.m. (1700 GMT), an hour before the FOMC statement.
In "when-issued" activity, traders expected the seven-year
issue, due October 2020, would fetch a yield of 1.895 percent at
auction, which would be lowest since May.
The government sold $32 billion in two-year notes and $35
billion in five-year debt in the previous two days to steady if
On the open market, benchmark 10-year Treasury notes
last traded up 3/32 in price with a yield of 2.496
percent, down 1 basis point from late on Tuesday.
The 10-year yield has been stuck in a 7-basis-point range
since last week as it has struggled to break below the current
level due to strong technical resistance, analysts said.
In another area of the bond market, the 10-year "breakeven"
rate, or the yield differential between 10-year Treasury notes
and the 10-year Treasury Inflation-Protected Securities, dipped
to 2.16 percent, hovering near its lowest level since
This measure of investors' inflation outlook was little
changed after the government released its September report on
consumer prices, which was delayed by the shutdown.
The government's consumer price index rose 0.2 percent last
month, bringing its year-over-year increase to 1.2 percent, the
smallest since April.