* Fed buys $1.48 billion bonds due 2038 and 2043, prices
* Fed to buy $2.75 bln- $3.50 bln notes due 2021-2023 later
* Treasury to sell $64 bln in 3, 10, 30-yr notes this week
* Fed meeting next week in focus for signs of tapering
By Karen Brettell
NEW YORK, Dec 9 U.S. Treasuries prices rose on
Monday as the Federal Reserve made the first of two separate
bond purchases and as investors focused on when the U.S. central
bank is likely to pare back this $85-billion-a-month buying
The Fed bought $1.48 billion in bonds due between 2038 and
2043 and will buy between $2.75 billion and $3.50 billion in
notes due 2021-2023 in a second operation on Monday.
The buybacks are helping support the market even as many
investors worry over the impact of when the U.S. central bank is
likely to scale back purchases.
Yields, nonetheless, have held relatively steady even as
tapering expectations increase. Investors see any cut as
initially being small and are comforted by statements that the
Fed will keep rates at record lows for several more years.
"I think the market is becoming a lot more comfortable with
tapering," said Gary Pollack, head of fixed income trading at
Deutsche Bank Private Wealth Management in New York.
"The next focus is the size of the taper ... the smaller and
longer is more beneficial for all financial markets," he added.
The Federal Reserve will begin reducing its massive
bond-buying program no later than March, according to a Reuters
poll of 18 of the 21 primary dealers conducted Friday.
Stronger economic data, including Friday's employment
report, have led many investors and analysts to bring forward
expectations on when the Fed could taper to January and many
traders have begun pricing for the possibility that the Fed
could act as early as next week when the Fed meets for the final
time this year.
Jim Vogel, an interest rate strategist at FTN Financial in
Memphis, Tennessee, sees the market as pricing in an approximate
75 percent chance of tapering this month. If the Fed does not
act, traders will then be scouring the language from next week's
Fed statement to see if a move in January is likely, he said.
"We're almost at the point now where the market will be
ready, particularly once it gets past the auctions this week, to
start really thinking about interpreting the Fed," Vogel said.
Benchmark 10-year notes were last up 4/32 in
price to yield 2.85 percent, down from 2.88 percent late on
They held near unchanged levels after an initial and brief
spike to a three-month high of 2.93 percent on Friday, after
data showed that U.S. employers added 203,000 jobs in November
and the jobless rate fell to a five-year low of 7.0 percent.
With a relatively light economic calendar, the Treasury's
sale of $64 billion in new coupon-bearing debt this week will
also take the spotlight.
The sales will include $30 billion in three-year notes on
Tuesday, $21 billion in a 10-year reopening on Wednesday and $13
billion in a 30-year reopening on Thursday.
Retail sales data on Thursday will also be watched for signs
of strength in consumer spending.