* Treasury to auction $35 billion in five-year notes
* Thin liquidity in holiday week exacerbates market moves
* Consumer confidence unexpectedly slips in November
By Luciana Lopez
NEW YORK, Nov 26 (Reuters) - Prices for U.S. Treasuries rose
on Tuesday as mixed economic data suggested the Federal Reserve
could continue its bond-buying program into the new year, though
analysts cautioned on thin liquidity because of the
Consumer confidence unexpectedly slipped in November, with
the Conference Board consumer confidence index at its lowest
"Consumer confidence came in significantly weaker than
expected. The market was looking for an increase, we got a
decrease," said Ian Lyngen, senior government bond strategist at
CRT Capital in Stamford, Connecticut.
"We did see a slight firming in the jobs component," he
said. "Mixed, but still consistent with this grinding bid we've
seen in the Treasury market this week."
In addition, while one closely-watched survey on Tuesday
showed U.S. single-family home prices posted their strongest
annualized gain in 7-1/2 years in September, another showed
gains in home prices eased.
"The net read from these (housing) data points is that the
back up in mortgage rates has stalled the housing market
recovery," said Steven Ricchiuto, chief economist at Mizuho
Securities USA in New York.
A subdued recovery, in turn, could encourage the Federal
Reserve to maintain its bond-buying program, which has been a
major support for Treasuries this year.
Trading is expected to be thin this week, as well, with the
bond market closed on Thursday for the Thanksgiving holiday and
closing early on Friday.
The benchmark 10-year Treasury note rose 9/32 in
price to yield 2.710 percent on Tuesday, compared to 2.7337
percent late on Monday.
The 30-year bond rose 18/32 in price to yield
3.804 percent on Tuesday, compared to 3.8221 percent late on
Investors are scouring data releases to get a sense of the
health of the world's biggest economy and how much more - or
less - support Fed policymakers might be inclined to give.
With Fed officials now hinting for months that they are
looking to exit an $85 billion per month asset-buying program,
markets around the world have whipsawed back and forth as
investors see greater or lesser odds of such a tapering in
purchases happening sooner or later.
But perhaps the most important data for the Fed will not be
released until next Friday, Dec. 6: nonfarm payrolls. The Fed
wants to see the unemployment rate closer to 6.5 percent from
its current 7.3 percent.
Economists in a Reuters survey see that rate edging down to
7.2 percent in November.
The Fed has emphasized that any pullback in purchases will
be data-dependent, with policymakers desirous of seeing a
stronger, self-sustaining recovery in the job market first.
The upcoming change of leadership at the Fed also adds to
uncertainty: Janet Yellen, the current number two at the bank,
is expected to take over from Chairman Ben Bernanke early next
A number of analysts say the central bank is likely to keep
rates lower for longer than previously expected next year to
help prop up the economy.
The Treasury will also sell $35 billion in five-year notes
on Tuesday, after having sold $32 billion in two-year notes on
Monday. The Treasury will also sell $29 billion in seven-year
notes on Wednesday.
"The 7-year auction tomorrow and possibly some early
month-end buying ahead of the Thanksgiving holiday and an early
close on Friday should lead to more flattening pressure in
coming days, but we look to use this to set up steepeners into
December as the trend steepening move continues into long-end
supply," said Richard Gilhooly, an interest rate strategist at
TD Securities in New York.
Portfolios managed against benchmark indexes often buy
longer-dated Treasuries around month-end.
- Budget, Tax & Economy