November 3, 2010 / 3:03 PM / 9 years ago

TREASURIES-Prices rise heading into expected Fed QE program

* Fed asset purchase announcement looms

* US election results seen as already priced into market

* ADP private employment rises by more than expected

* Services growth, factory orders stronger than expected (Adds economist’s comments, updates prices)

By Chris Reese

NEW YORK, Nov 3 (Reuters) - U.S. Treasury debt prices rose on Wednesday for a second straight day as investors prepared for the Federal Reserve to announce that it will buy more government debt to prop up the sputtering economy.

Midterm congressional elections in which Republicans pushed Democrats from power in the House of Representatives and strengthened their ranks in the Senate had only scant impact on Treasuries prices.

“The election results were pretty well priced in, based on the market reaction,” said Lou Brien, market strategist at DRW Trading Group in Chicago. He added that “we are just waiting for the Fed — there is very little market-making going on until we get the Fed results.”

The U.S. central bank is expected to announce a new program of Treasury purchases at the conclusion of its two-day policy meeting Wednesday afternoon, with most analysts looking for buying of $100 billion a month for five months with an open-ended commitment to buy more if necessary.

Ahead of the release of the Fed’s policy statement at about 2:15 p.m. EDT (1815 GMT), the benchmark 10-year Treasury note US10YT=RR rose 13/32 in price to yield 2.54 percent, down from 2.59 percent late on Tuesday.

Thirty-year bonds US30YT=RR were a point higher, their yield falling to 3.88 percent from 3.94 percent.

Gains were briefly pared after a larger-than-expected rise in private payrolls in October in the ADP Employer Services report, skewing the risks to a bigger-than-expected increase in October’s nonfarm payrolls data on Friday and temporarily undermining some of the safe-haven appeal of government debt.

The ADP Employer Services report said U.S. private employers added 43,000 jobs in October compared with a revised loss of 2,000 jobs in September, which boosted expectations for an increase in the government’s nonfarm payrolls number. For details see [ID:nN03287204].

“The market’s concern about the recovery will remain and the Fed later today may look at this as still a sign they need to ease further on monetary policy,” said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

The median of forecasts from analysts polled by Reuters is for employers to have added 60,000 jobs in October after shedding 95,000 jobs in September. [ID:nN02101041].

The focus on the Fed also dimmed any market impact from quicker-than-expected growth in the U.S. services sector in October and the largest gain in factory orders in eight months in September.

“I doubt that this is going to change the Fed’s view much, but looking forward if things aren’t getting worse, if they are staying the same or improving a bit, that could play into what they may do down the road,” said Sean Incremona, economist at 4Cast Ltd in New York. (Additional reporting by Rodrigo Campos; Editing by Dan Grebler)

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