November 30, 2012 / 4:20 PM / 5 years ago

TREASURIES-U.S. bond prices rise on month-end buying

* Benchmark note prices set for 5th straight days of gains
    * "Fiscal cliff" worries underpin support for bond prices
    * Consumer, factory data support view of fragile U.S. growth

    By Richard Leong
    NEW YORK, Nov 30 (Reuters) - U.S. government debt prices
rose on Friday on purchases for month-end portfolio adjustments
and ongoing safe-haven bids on anxiety about the lack of
progress in budget talks in Washington.
    Bond prices were on track for a fifth straight day of gains
with benchmark yields falling 9 basis points on the week.
    "You are getting a bit of end-of-the-month buying, which is
giving the market a bit of a pop," said Jim Kochan, chief fixed
income strategist with Wells Fargo Fund Management in Menomonee
Falls, Wisconsin.
    The market has been volatile as investor sentiment changes
on whether U.S. President Barack Obama and Congress will reach a
timely budget compromise to prevent a series of tax increases
and spending cuts from phasing-in next year.
    This $600 billion fiscal contraction, dubbed the "fiscal
cliff," could cause a U.S. recession, according to economists.
    "We are treading water here to see what the President and
the Congress will do next," said Wells' Kochan. 
    Traders have bought and sold Treasuries this week in
reaction to recent public remarks from leading Democratic and
Republicans lawmakers. 
    President Obama was scheduled to speak about the budget
negotiation just after noon (1700 GMT) during a visit to a
factory in Pennsylvania in an effort to press his case for
raising taxes on the wealthy to narrow the deficit.
    This budget standoff exacerbated a fragile economic backdrop
where growth is still weak and unemployment remains historically
high, analysts said.
    Government data showed Americans cut back their spending for
the first time in five months in October, while a private report
showed business activity in the upper Midwest region barely grew
in November.  
    A wobbly economy together with the risk from the "fiscal
cliff" will likely cause the Federal Reserve to cling to its
ultra-loose monetary policy, analysts said.
    The Fed was scheduled to buy $1.75 billion to $2.25 billion
in Treasuries that mature in Feb. 2036 to Nov. 2042, which was
its latest purchase for 'Operation Twist.' This program due to
expire at year-end was intended to lower interest rates in an
effort to support the economy.
    Benchmark 10-year Treasury notes traded 4/32
higher in price to yield 1.606 percent, down 1.4 basis points
from late on Thursday.
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