* Concerns over a strike on Syria lend support to bond
* Fed's Beige Book, Williams, Kocherlakota on tap
* Fed to buy $1.25 bln to $1.75 bln in long-dated Treasuries
By Richard Leong
NEW YORK, Sept 4 U.S. government debt prices
edged up on Wednesday, as bargain-minded investors emerged to
help stabilize a market that has been on edge over the Federal
Reserve possibly deciding to reduce its bond purchases in two
The Treasuries market was also supported by traders looking
to profit from the Fed's latest purchase operation. It plans to
buy $1.25 billion to $1.75 billion of Treasuries that mature in
Feb. 2036 through May 2043 as part of its planned $45 billion of
Treasury debt purchases in September.
Longer-dated Treasury yields rose near two-year highs on
Tuesday on unexpectedly strong factory data that might allow the
U.S. central bank to pare its $85 billion monthly purchases of
Treasuries and mortgage-backed securities, known as QE3.
Yields were held in check on safehaven bids linked to
jitters over a U.S. military strike against Syria for its use of
poison gas that U.S. officials say killed 1,429 civilians last
month. President Barack Obama won the backing of key federal
lawmakers in his call for limited action on Syria. It is unclear
when a strike will occur after traders had expected such a move
this past weekend.
"People are waiting for what happens with Syria. It might be
positive for Treasuries," said Justin Lederer, Treasury
strategist with Cantor Fitzgerald in New York.
A survey from J.P. Morgan Securities released on Wednesday
showed more investors added longer-dated Treasuries on Tuesday
compared to a week earlier. The share of these "long" investors
increased from 17 percent to 23 percent, the highest level since
July 22, J.P. Morgan said.
Still the marquis event for the bond market this week is the
government's payroll report on Friday. Strong jobs gains would
seal expectations the Fed would scale back its bond purchases
starting in October, while a weak figure would revive bets the
central bank would delay such a move.
Economists polled by Reuters estimate U.S. payrolls expanded
by 180,000 jobs in August while the unemployment rate remained
steady at 7.4 percent.
Other recent data suggested the U.S. economy while still
growing has slowed due to sluggish global demand and the spike
in mortgage rates.
The government reported the U.S. trade gap grew a tad more
than expected in July as exports slipped after contributing to a
huge contraction in the deficit the previous month.
Investors will receive anecdotal views on the economy when
the Fed releases its Beige Book at 2 p.m. (1800 GMT), two weeks
before its next policy meeting.
They will also digest views later Wednesday from two Fed
officials, San Francisco Fed President John Williams and
Minneapolis Fed chief Narayana Kocherlakota. Neither are voters
U.S. benchmark 10-year Treasury notes edged up
2/32 in price, yielding 2.856 percent, down 0.7 basis point from
late on Tuesday. The 10-year yield was 8 basis points below a
25-month high recorded on Aug. 22, according to Reuters data.
The 30-year bond rose 8/32 in price with a yield
of 3.779 percent, down 1.4 basis points from Tuesday's close.
The 30-year yield was about 16 basis points below its two-year
high set two weeks ago.
While longer-dated debt yields have traded in a volatile
manner on worries about less Fed purchases, short to medium term
yields have risen on speculation over the timing on the Fed's
first rate increase.
"The market is adjusting to the idea that low rates are not
going to be here forever," said Thomas Roth, executive director
of U.S. government bond trading at Mitsubishi UFJ Securities USA
in New York.
The yield on two-year Treasuries closed at 0.4190
percent on Tuesday, which was its highest level since late July
2011, while the yield on five-year notes finished at
1.682 percent, its highest level since early July 2011.