* Chicago PMI surges to 2-1/2-year high in October
* U.S. jobless claims fall in line with forecast
* Treasuries poised for second month of gains
By Richard Leong
NEW YORK, Oct 31 (Reuters) - U.S. Treasuries prices dipped
slightly on Thursday as a surprisingly strong report on Midwest
business activity soothed worries about sluggish fourth-quarter
growth after the recent federal government shutdown.
Despite Thursday's decline, the bond market was on track for
a second month of gains after a dismal summer.
The Institute for Supply Management-Chicago said its
regional business index jumped to 65.9 in October from 55.7 last
month. The reading handily beat the 55.0 forecast by analysts
and was the highest since March 2011.
"This was just ridiculously strong," said Eric Green, global
head of rates and currency research and strategy at TD
Securities in New York.
Still, Green and other analysts downplayed the importance of
the data as other indicators have signaled slower demand and
hiring in the aftermath of the first partial federal government
shutdown in 17 years. They stuck to the view that the Federal
Reserve will maintain its current $85 billion monthly bond
purchases into early 2014 to support the economy.
The federal government's report on Thursday of a decline in
new jobless claims in the latest week added to signs of
resilience in the economy. New claims fell by 10,000 to 340,000,
a hair above the average estimate of 339,000 new
"Things are not unraveling even though we might get another
disappointing jobs report," Green said.
The Labor Department will release its non-farm payrolls
report for October at the end of next week. Investors are keen
to gauge whether the 16-day government shutdown hurt the U.S.
In brisk volume, the bond market extended losses from
Wednesday, when investors saw a Fed post-meeting policy
statement as slightly more hawkish. Analysts said the Fed left
the door open to reducing stimulus in the coming months even
though policy-makers acknowledged slower growth due to the
"They are trying to reinforce the view they are data
dependent. They really don't know," said James Sarni, managing
principal at Payden & Rygel in Los Angeles, which oversees $80
billion in assets.
The Fed on Thursday bought $927 million worth of Treasuries
due in November 2024 to May 2030, the latest purchase in its
Benchmark 10-year Treasury notes were 6/32 lower
in price with a yield of 2.547 percent, from 2.527 percent late
But 30-year bonds pared early losses to trade
flat, yielding 3.633 percent.
About $251 billion worth of Treasuries changed hands as of
noon Thursday, 40 percent above their 20-day average, according
to ICAP, the world's biggest inter-dealer broker in U.S.
The 10-year yield has fallen around 50 basis points from a
two-year high of 3 percent. The yield touched a three-month low
last week at 2.471 percent.
- Budget, Tax & Economy
- government shutdown