TREASURIES-Prices rise as market awaits U.S. jobs data
* U.S. capital goods orders sank more than expected in
September
* October nonfarm payrolls due Friday, GDP due Thursday
* U.S. Treasury quarterly refunding announcement due
Wednesday
By Ellen Freilich
NEW YORK, Nov 4 (Reuters) - U.S. Treasury debt prices rose
modestly on Monday, retracing some recent losses and hemming
yields within recent ranges as investors looked ahead to key
data later in the week as well as information on upcoming
Treasury debt sales.
Treasuries sank on Friday after a stronger-than-expected
view of factory activity alleviated some concern about the
negative impact on the economy of the partial shutdown of the
federal government during the first half of October.
A report on actual factory orders in September, released on
Monday, was less upbeat, with the three-month annualized rate
for orders of non-defense related capital goods, excluding
aircraft, down 7.2 percent, from the second-quarter average.
The weakness in those orders was interpreted as a sign
companies cut their investment plans sharply as Washington
hurtled toward the brink of default.
While the orders data were essentially bond-friendly, the
market looked toward this week's Treasury refunding announcement
and the October U.S. payrolls report.
"The market largely is just marking time ahead of the
refunding announcement on Wednesday morning and the employment
report on Friday," said John Canavan, fixed-income analyst at
Stone & McCarthy Research Associates.
The modest gains in prices merely reversed some of the
ground lost last Thursday and Friday, he said.
"The market had a little bounce as we settled into ranges
today," he said. "The price action was not greatly affected by
the factory orders release or anticipation of a weak payrolls
report on Friday. It was more a matter of pushing paper around
and waiting for another reason to move."
U.S. third-quarter gross domestic product data are due on
Thursday. Those figures will help show how strong momentum was
in the economy before the October government shutdown, which was
sparked by Republican efforts in Congress to undermine President
Obama's signature healthcare law.
And on Friday, the closely-watched October non-farm payrolls
will be released. These key U.S. economic reports were delayed
because of the shutdown and are among the most important data
for weighing future Federal Reserve monetary policy.
"There's a lot of short-term risk, depending on whether data
surprises to the upside," said Robert Tipp, chief investment
strategist at Prudential Fixed Income, in Newark, New Jersey.
Fed policymakers want to see the unemployment rate dropping
closer to 6.5 percent from the current 7.2 percent, but
economists in a Reuters survey expect that rate to have edged up
in October to 7.3 percent.
The Fed recently kept in place its $85-billion-per-month of
mortgage-backed securities and Treasuries purchases, although a
statement from policymakers concluding a two-day meeting had a
more hawkish tinge than some had expected.
As a result, analysts broadly expect the Fed to begin
tapering those asset purchases later than expected, perhaps well
into 2014 rather than by the end of this year.
Treasuries could remain rangebound in coming sessions, with
investors reluctant to take on large positions until they have
more certainty on the momentum in the economy.
"This week, neutral data should lead to a 2.50 percent to
2.75 percent trading range on 10-year notes," said Chris Bury,
head of U.S. rates trading and sales at Jefferies & Co.
Prices for U.S. benchmark 10-year Treasury notes
rose 7/32 in price on Monday to yield 2.60 percent, compared to
a yield of 2.62 percent late on Friday.
The U.S. 30-year bond rose 2/32 in price to
yield 3.696 percent, versus 3.704 percent late on Friday.
The U.S. Treasury on Wednesday will issue its quarterly
refunding announcement, which will lay out funding needs for the
next quarter and tell investors how much U.S. debt will be
auctioned by the government.
The Treasury will sell three-, 10- and 30-year securities
next week and Treasury officials could also offer more
information on its plans to sell floating rate notes in 2014.
A special question the Treasury asked dealers who underwrite
U.S. debt auctions concerned their views on the conduct of the
Treasury's sales of five-year Treasury Inflation Protected
Securities (TIPS), Canavan noted.
"There's potential for some discussion in the Treasury's
refunding announcement about that issue," Canavan said.
The Federal Reserve on Monday bought $3.718 billion in
Treasuries maturing August 2019 through June 2020 as part of its
ongoing stimulus program.
