By Richard Leong and Luciana Lopez
NEW YORK, Nov 1 (Reuters) - Prices for U.S. Treasuries sank
on Friday as strong factory data suggested the world's biggest
economy had not lost traction during a government shutdown this
month, eroding safe-haven bids.
Economists have worried that a federal government shutdown
in the first half of the month, prompted by a congressional
spending impasse, would drag on economic growth.
But the Institute for Supply Management said its index on
national manufacturing activity unexpectedly jumped to a 2-1/2
year peak in October. Analysts had expected a modest decline.
'The tone of this report was unambiguously strong, and the
underlying message appears to be that the political turmoil in
Washington earlier this month has had no impact on real economic
activity,' said Millan L. Mulraine, director of U.S. research
and strategy at TD Securities in New York.
Still, a stronger economy could convince the U.S. Federal
Reserve to slow its bond-buying program in coming months,
perhaps as soon as December, rather than later in 2014.
'There is a feeling that they might taper in December. It
has gained a little steam, but that's not the consensus,' said
Matt Duch, a portfolio manager at Calvert Investments in
Still, analysts said the Fed would need more evidence of a
recovery before policymakers pull back.
'The market is positioning for the Fed to taper early next
year. I would be surprised if they move before March,' said
Sharon Stark, chief fixed-income strategist with D.A. Davidson &
Co in St. Petersburg, Florida.
U.S. benchmark 10-year Treasury notes were 22/32
lower in price with a yield of 2.624 percent, compared to 2.543
percent late Thursday and 2.503 percent a week ago.
The 30-year bond shed over 1 point in price to
yield 3.700 percent, up from 3.632 percent late in the previous
session and 3.593 percent a week ago.
Longer-dated yields were on track for their biggest weekly
rise since early September.
Bond yields have risen even though the Fed earlier this week
decided to stick to its $85 billion monthly bond purchases.
Policymakers, while acknowledging risks from the government
shutdown, offered no promise that they would not taper their
third round of quantitative easing in the coming months.
Philadelphia Fed President Charles Plosser told CNBC
television on Friday he would like a cap on the amount of bonds
the central bank buys under the current stimulus program, which
have totaled some $1 trillion since it began in September 2012.
On the other hand, St. Louis Fed chief James Bullard said
policymakers need to be confident the labor market will continue
to improve before they decide to reduce bond purchases.
The Federal Reserve on Friday bought $1.565 billion of
Treasuries maturing February 2038 through February 2043 as part
of its latest monetary stimulus program.
(Editing by Bernadette Baum, Nick Zieminski, Chris Reese and
((firstname.lastname@example.org)(+1 646 223 6319)(Reuters
(-------MARKET SNAPSHOT AT 4:01 p.m. EDT (2001 GMT)------- Dec T-Bond 133-22/32(-1-04/32) Dec 10-Year note 126-24/32 (-20/32) Change vs Current Nyk yield Three-month bills 0.04 (+0.00) 0.041 Six-month bills 0.08 (unch) 0.081 Two-year note 99-28/32 (-) 0.313 Five-year note 99-13/32 (-10/32) 1.377 10-year note 98-30/32 (-22/32) 2.624 30-year bond 98-21/32 (-1-07/32) 3.700 DOLLAR SWAP SPREADS LAST Change U.S. 2-year dollar swap spread 11.50 (unch) U.S. 3-year dollar swap spread 12.75 (unch) U.S. 5-year dollar swap spread 13.25 (unch) U.S. 10-year dollar swap spread 14.00 (-0.25) U.S. 30-year dollar swap spread -3.25 (+0.75))
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.