December 7, 2012 / 9:36 PM / 5 years ago

TREASURIES-Prices fall on job growth, ahead of new supply

* Treasuries retreat after Nov job creation tops forecasts
    * Treasury to sell $66 bln in 3, 10, 30-year debt next week
    * Fed still seen likely to set new bond purchases next week

    By Ellen Freilich
    NEW YORK, Dec 7 (Reuters) - U.S. Treasuries fell on Friday
after stronger-than-expected U.S. job growth pushed investors
into riskier assets at the expense of safe-haven U.S. government
    Traders also took some profits after three straight days of
gains, making room for new securities the Treasury will auction
next week.
    The Labor Department reported that 146,000 jobs were created
in November, contradicting forecasts for a sharp pull-back
related to Superstorm Sandy. But although the government also
reported the jobless rate fell to 7.7 percent, the data was not 
enou gh to d ist urb the convi ction that the Federal Reserve would
keep interest rates low.
     T he decline in the unemployment rate, the lowest since
December 2008, occurred b ecause p eople s topped l ooki ng for work, 
something that does not bode well for the economy.
[ ID:nL1E8N732K]
    "The central case that the Fed is going to do QE is
unchanged," said TD Securities interest-rate strategist Richard
Gilhooly in New York, referring to the Federal Reserve's
unconventional method of keeping interest rates low known as
quantitative easing.
    Benchmark 10-year notes fell 12/32 in price to
yield 1.63 percent, up from 1.59 percent late on Thursday.
    Thirty-year bonds fell 29/32 in price, their
yields rising to 2.82 percent from 2.77 percent.
    Treasuries prices have risen in recent sessions on
expectations that at the close of the Fed's two-day policy
meeting on Wednesday it will announce a series of new bond
    The Fed's current "Operation Twist" program, under which it
buys longer-dated debt and funds the purchases with sales of
short-dated notes, is set to expire at the end of the year.
Traders expect the Fed will then turn to outright purchases of
Treasuries as it runs out of short-dated debt to sell.
    "Everyone expects the Fed to continue with their easing,
primarily with mortgage buying. You also have the Treasury
auctions next week. So you're setting up for the auctions amid
expectations that the Fed's easing will continue," said Matthew
Duch, portfolio manager at Bethesda, Maryland-based Calvert
Investments, with $12 billion in assets under management.
    Auctions of $66 billion in new three-, 10- and 30-year bonds
next week could weigh on bond prices in the next few sessions.
    "In general I would imagine a general discount moving into
next week to take down the supply," said Tom Tucci, head of
Treasuries trading at CIBC in New York.
    The Treasury will sell $32 billion in three-year notes on
Tuesday, $21 billion in 10-year notes on Wednesday and $13
billion in 30-year bonds on Thursday.
    Treasuries showed little reaction to a survey released on
Friday showing  Americans' outlook on the economy and their
finances took a turn for the worse in early December.
    In the coming week, "the market will also focus on what the
Fed says about how it will communicate its intentions in the
future, on whether it will set targets for unemployment and
inflation," Duch said.
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