* Subdued U.S. consumer income, spending erodes Fed taper
* Geo-political risk before 3-day weekend feeds bid
* Month-end portfolio-related buying aids long end
By Luciana Lopez and Ellen Freilich
NEW YORK, Aug 30 Prices for U.S. Treasuries
ended Friday little changed on weaker-than-expected economic
data, with the possibility of a military strike against Syria
adding to jitters ahead of a holiday-lengthened weekend.
U.S. Secretary of State John Kerry made clear on Friday that
the United States would punish Syrian President Bashar al-Assad
for the "brutal and flagrant" chemical weapons attack that the
United States says killed more than 1,400 people in Damascus
With the possibility of a weekend attack and U.S. markets
closed on Monday for the Labor Day holiday, investors were wary
of shorting Treasuries.
"Syria not only changed some risk profiles, it also changed
confidence levels behind what people think is going to happen
based on their (previous) forecasts," said Jim Vogel, an
interest rate strategist at FTN Financial in Memphis, Tennessee.
Month-end buying also helped Treasuries, analysts said.
"It's month-end. There's position squaring and concerns over
potential involvement in Syria. All of that is contributing to
people not wanting to be short U.S. debt at this point," said
Richard Schlanger, vice president and portfolio manager for
Boston-based Pioneer Investments, with approximately $20 billion
in fixed income assets under management.
The benchmark 10-year Treasury note dipped 6/32
in price to yield 2.784 percent from 2.766 percent late on
Subdued data on U.S. personal income, spending and inflation
in July eroded views the U.S. Federal Reserve might start
backing off its bond-buying stimulus program next month.
When the Fed will slow its $85 billion per month in buying
of Treasuries and mortgage-backed securities has become a major
question for U.S. debt markets.
Speculation that the bank could taper as soon as its Sept.
17-18 meeting has sent benchmark yields soaring more than 100
basis points in recent months.
But if data suggest the world's largest economy is not yet
ready to stand on its own, the Fed will be less likely to pare
back those purchases.
The data "will lead to weaker estimates of Q3 GDP growth,"
said Cary Leahey, senior advisor to Decision Economics in New
York. "That should be bullish for bonds because it pushes up the
timing for tapering bond purchases to December."
The Commerce Department reported U.S. consumer spending rose
just 0.1 percent and inflation was tame in July. Economists had
estimated consumer spending to have risen 0.3 percent last
Excluding food and energy, the price index for consumer
spending rose just 0.1 percent, leaving core prices up 1.2
percent from a year ago, below the Fed's 2 percent target.
The data on the first month of the third quarter provided a
cautionary note on the economy as the Federal Reserve considers
cutting back on its massive bond-buying program.
"The economic numbers are not compelling enough for the Fed
to taper its bond buying in September," Schlanger said. "They
will continue to monitor economic activity for another quarter
or so and wait for December."
Month-end portfolio rebalancing was also supportive for
bonds. Portfolios managed against benchmark indexes often buy
longer-dated Treasuries around month-end.
The 30-year Treasury bond rose 2/32 in price,
their yields easing to 3.710 percent from 3.718 percent late on
In the coming week, the market will focus on nationwide
surveys of the manufacturing and non-manufacturing sectors of
the economy and, most importantly, on the August nonfarm
payrolls report, due Sept. 6. Those will be the last set of
comprehensive U.S. employment data released before the Fed's