August 5, 2013 / 3:03 PM / 4 years ago

TREASURIES-U.S. bond prices slip on services data before supply

* U.S. ISM services index rebounds from three-year low
    * Fed to buy $1.25-1.75 billion in long-dated Treasuries
    * U.S. Treasury to sell $72 billion in coupon supply


    By Richard Leong
    NEW YORK, Aug 5 (Reuters) - U.S. government debt prices fell
on Monday as traders reduced their bond holdings on surprisingly
strong data on the U.S. services sector after Friday's market
rally due to a disappointing July payrolls report.
    U.S. bond prices retraced some of Friday's rise in advance
of this week's August refunding during which the Treasury will
sell $72 billion worth of coupon-bearing debt.
    "We are giving up those gains on Friday. Now we are going
into this week's supply and whether people want them," said
Thomas Roth, executive director of U.S. government bond trading
at Mitsubishi UFJ Securities USA in New York.
    The Treasury Department will sell $32 billon in three-year
debt on Tuesday, $24 billion in 10-year notes
 on Wednesday and $16 billion in 30-year bonds on
Thursday.
    On the open market, benchmark 10-year notes were
down 12/32 in price with a yield of 2.648 percent, up 5.0 basis
points from late on Friday when the 10-year yield traded at
2.749 percent, just below a two-year high.
    Exit from weekend safe haven positions due to U.S. embassy
closures in Middle East and Africa after an al Qaeda threat also
caused Treasury yields to rise. 
    While U.S. payrolls grew 162,000 last month, falling short
of traders expectations, analysts said the slower hiring might
not be enough to avert the Federal Reserve from scaling back its
bond-purchase stimulus as early as September.
    Apart from the jobs report, other recent data suggested the
U.S. economy is expanding albeit at a modest pace that has kept
unemployment high and inflation at a worrisome low level.  
    The Institute for Supply Management's index on the U.S.
services sector rose to 56.0 from 52.2 in June, signaling
ongoing improvement in retail, restaurant and other services
industries. Analysts had forecast a July reading of 53.0.
    The latest ISM services figure matched the level last seen
in February and rebounded from a three-year low. 
     
 
    Services industries slowed their hiring in July and
suppressed overall payroll growth, which disappointed investors
and reduced bets the Federal Reserve might cut its monthly bond
purchases later this year.    
    The central bank will buy $1.25 billion to $1.75 billion in
Treasuries that will come due in Feb. 2036 to May 2043 at 11
a.m. EDT (1500 GMT), as a part of its quantitative easing
program, known as QE3, which is aimed at helping the economy.

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