October 24, 2013 / 3:37 PM / 4 years ago

TREASURIES-Yields near three-month lows as Fed taper seen next year

* Yields fall, near 3-month low as investors return
    * Treasury to sell $7 bln in 30-year TIPS reopening
    * Fed buys $1.56 bln bonds due 2038-2043

    By Karen Brettell
    NEW YORK, Oct 24 (Reuters) - U.S. Treasuries yields held
near three-month lows on Thursday as expectations that the
Federal Reserve is still months away from reducing the size of
its bond-purchase program kept up strong demand for the debt.
    Treasuries have rallied since data on Tuesday showed that
employers added fewer jobs than expected in September, stoking
fears the economy was slowing even before the government's
16-day shutdown.
    Fed policy is seen as being very dependent on economic data,
though over the coming month they are likely to be skewed by the
effects of the government shutdown, limiting insight into the
actual state of the economy and to what degree the shutdown and
the fight over raising the debt ceiling may have harmed growth.
    "What we've been seeing since the government shutdown and
debt ceiling was resolved is a desire to jump back into
Treasuries," said Jason Rogan, managing director in Treasuries
trading at Guggenheim Partners in New York. "Most market
participants are of the mind that the Fed is on hold for the
foreseeable future."
    Global economic indicators pointed to slowing growth on
Thursday. U.S. manufacturing output fell for the first time in
four years while the euro zone economy lost momentum, surveys on
Thursday showed. 
    Investors will be watching for any new information about Fed
policy when the U.S. central bank meets next week, though it is
seen as unlikely to reduce its $85 billion a month in purchases
until March.
    Some bond buying earlier on Thursday was attributed to a
report by Medley Global Advisors that noted slowing economic
data will make it more difficult for the Fed to build a case to
reduce its bond purchases.
    Benchmark 10-year Treasuries were last unchanged
in price to yield 2.48 percent, near the three-month lows of
2.47 percent set on Wednesday. They have fallen from 3.00
percent seen on Sept. 5, before the Fed surprised investors by
keeping the size of its purchase program unchanged.
    Yields have retraced about half of their increase in
reaction to Fed Chairman Ben Bernanke hinting, back in May, the
Fed might reduce its bond purchases by late this year.
    The Fed bought $1.56 billion in bonds due from 2038 and 2043
on Thursday as part of its ongoing purchase program.
    The government will add $7 billion to a 30-year TIPS issue
originally issued in February at an auction on Thursday. Traders
expected the reopened 30-year TIPS supply to fetch a yield of
1.348 percent.
    The Treasury said on Thursday it will sell $96 billion in
new coupon-bearing supply next week, including $32 billion in
two-year notes on Monday, $35 billion in five-year notes on
Tuesday and $29 billion in seven-year notes on Wednesday.
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