* Pending home sales fall to a 10-month low in October
* Market to close on Thursday for Thanksgiving holiday,
close early on Friday
* Nonfarm payrolls, due next week, to be key for market
By Luciana Lopez
NEW YORK, Nov 25 Prices for U.S. Treasuries
edged up slightly on Monday as housing data proved weaker than
expected, kicking off a holiday-shortened week with a relatively
light slate of economic data.
Contracts to buy previously owned U.S. homes fell for a
fifth straight month in October, hitting a 10-month low and
adding to signs of cooling in the housing market.
While prices added to modest gains after those figures, and
a few other housing indicators were on tap for the rest of the
week, analysts said they were instead focused on upcoming
figures on the health of the U.S. jobs market, key for gauging
upcoming policy moves by the U.S. Federal Reserve.
The matter of when the Fed might slow its $85 billion per
month in buying of Treasuries and mortgage-backed securities has
become key for global markets.
Until that becomes clear, analysts said markets will stay
"The die has been cast. We're in this trading range,
somewhat obsessing about whether the Fed's going to taper in
December or January or March," said Wilmer Stith, portfolio
manager of the Wilmington Broad Market Bond Fund.
Stith said he expected the yield on benchmark 10-year notes
to stay within the 2.5 percent to 3 percent range.
The uncertainty around the Fed's future policy direction has
injected risk into bond markets. As well as questions about the
strength of the world's biggest economy, Janet Yellen, who is
expected to take over as chair of the U.S. central bank near the
start of the year, could also surprise markets, though she is
viewed as dovish.
Still, the Fed could choose a cautious path when it does
pull back on their quantitative easing program, said Deepak
Narula, founder of Metacapital Management LP in New York, who
oversees $1.45 billion. His main fund last year returned more
than 40 percent.
"Probably the Fed is going to be fairly careful in pulling
back on the stimulus," he said at last week's Reuters Investment
Outlook Summit. "And so even as they taper and even as they end
QE, it's probably going to come with forward guidance that's
more extended" to show lower interest rates for longer into the
With anchored short-term rates, then, longer-term rates are
more vulnerable, he added.
The benchmark 10-year Treasury note rose 5/32 in
price to yield 2.737 percent on Monday, compared to 2.754
percent on Friday.
The 30-year bond gained 10/32 in price to yield
3.823 percent on Monday, from 3.84 percent late on Friday.
Month-end portfolio rebalancing could also support bonds
toward the end of the week. Portfolios managed against benchmark
indexes often buy longer-dated Treasuries around month-end.
With analysts expecting thin trading in the
holiday-shortened week, next week's nonfarm payrolls could take
on added significance.
Economists in a Reuters poll expect those data, due on Dec.
6, to show a gain of 185,000 payroll positions in November.
Last month's figure, at 204,000, came in better than
expected, fueling speculation that the Fed could pare its bond
buying program in coming months, if not at the end of this year.
"Our view is the economy is creating too many nonfarm
payroll jobs to not call this economy normal," said Christopher
Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi
UFJ in New York. "We don't see a role for monetary policy to
The Treasury will also kick off debt sales this week with an
auction of $32 billion in two-year notes on Monday, followed by
sales of $35 billion in five-year notes and $29 billion in
seven-year notes later in the week.