* Fed as expected cuts monthly bond-buying by $10 bln
* Safe-haven bids resume on emerging markets focus
* U.S. 2-year floating-rate notes make strong debut
* U.S. to sell 5-year, 7-year notes on Thursday
By Sam Forgione
NEW YORK, Jan 29 U.S. Treasuries prices rose on
Wednesday, with benchmark yields hitting two-month lows after
the U.S. Federal Reserve's expected decision to trim its asset
purchases as investors retrained their focus on weakness in
emerging market economies.
The Fed announced a further $10 billion cut in its monthly
bond purchases in a statement after its two-day policy meeting,
reducing its monthly bond-buying to $65 billion per month
starting in February.
"The FOMC decision to taper came in as expected, so
investors returned to the recent focus, which is the risk-off
move," said Dion Chu, Treasury trader at Jefferies & Co. In New
In December, the Fed shrank its monthly purchases of
Treasuries and mortgage-backed securities by $10 billion to $75
Weakness in emerging markets returned to investors' minds
after the Fed statement, driving safe-haven bids for Treasuries.
Turkey's interest rate hike during a midnight policy meeting to
defend its battered lira currency did little to calm fears.
"I would be very hesitant to say that the worries in the
emerging market economies have now dissipated," said Heather
Loomis, West Coast director of fixed income at JP Morgan Private
Bank in San Francisco.
Treasuries prices rose earlier in the day after investors
sold riskier emerging market assets and bought safe-haven bonds
in anticipation of a further Fed pullback.
A reduction in the Fed's bond-buying removes support from
emerging market assets, which have benefited from investors'
greater risk appetite in the face of low U.S. interest rates.
Treasury prices also rose despite incoming supply. The U.S.
Treasury Department debuted $15 billion in two-year
floating-rate notes to strong demand on Wednesday,
and will sell $35 billion in five-year notes and
$29 billion in seven-year debt on Thursday.
Benchmark 10-year Treasury notes were last up
17/32 in price to yield 2.69 percent. The yield hit a session
low of 2.66 percent, the lowest in over two months. Bond yields
move inversely to their prices.
The 30-year Treasury bond was last up 26/32 in
price to yield 3.63 percent. The yield touched a session low of
3.61 percent, its lowest since late October.
The removal of uncertainty surrounding the Fed also left
some investors to mull concerns surrounding the U.S. labor
market and the upcoming debt ceiling debate, supporting gains in
Some investors are concerned that Washington won't raise the
government's $16.7 trillion statutory borrowing limit before it
is expected to be exhausted by early March, while weak U.S.
December nonfarm payrolls data have fueled concerns over the
near-term economic outlook.
"If we look beyond today's announcement, there are some
things on the near-term horizon that are still a little bit of a
worry," said Jim Sarni, managing principal at Payden & Rygel in
The Commerce Department reported on Tuesday that orders for
long-lasting U.S. manufactured goods fell by 4.3 percent in
December, stoking worries about the U.S. economy and supporting
On Wall Street, the three major stock indexes dipped, with
the benchmark Standard & Poor's 500 stock index falling
1.02 percent to its lowest level since mid-November. The S&P 500
has fallen four of the past five sessions on fears about the
turmoil in emerging markets spreading to other regions.