TREASURIES-U.S. Treasuries gain after storm on month-end trades
NEW YORK, Oct 31 (Reuters) - U.S. Treasury prices rose on Wednesday on month-end extension trades after trading resumed following a huge storm in the U.S. Northeast that shut the bond market for a day and a half. Traders said portfolio managers were buying Treasury debt to adjust average portfolio durations to meet benchmarks by the end of the month. ``We are higher due to month-end extensions as the bond market was closed yesterday and for part of Monday, due to the storm,'' said Tom di Galoma, managing director at Navigate LLC, a broker-dealer in Stamford, Connecticut. Although a weaker-than-expected Chicago Purchasing Managers index did not have a big impact, weaker-than-forecast economic data are generally supportive for inflation-sensitive bonds. The third-quarter employment cost index, up just 0.4 percent, ``(continued) to suggest no inflationary pressure from the wage side,'' Goldman Sachs economists said. Early selling in 30-year bonds - based on the rationale that insurance companies would sell long-dated securities to make payments for damage from the storm - dwindled, and bonds then edged higher along with the rest of the market. The market closed early on Monday, and it was shut all day on Tuesday because of disruptions in power and transportation caused by monstrous storm Sandy, which hit the south New Jersey coast on Monday night with hurricane-force winds. On Wednesday, volume was light with some trading desks still thinly staffed. ``The after-effects of the storm remain with us, with limited electricity meaning no New York City subways and few commuter rails, roads still requiring some nimble footwork around debris, and a bond community that probably hasn't showered in a few days or had a hot cup of coffee. So while trading will take place and data will be released, the market is still going to be illiquid,'' said David Ader, head of government bond strategy at CRT Capital Group, in Stamford, Connecticut. The benchmark 10-year U.S. Treasury note rose 7/32 in price, its yield easing to 1.70 percent from 1.725 percent on Monday. The 30-year bond gained 8/32, its yield slipping to 2.87 percent from 2.890 percent on Monday. The Securities Industry and Financial Markets Association recommended that the U.S. government bond market open on Wednesday after New York was hit by Sandy, the worst storm to strike the metropolitan area in 75 years. Trading stayed within well-established ranges, a situation expected to continue at least until next week's U.S. presidential elections. The next key market event is the release of October U.S. payrolls numbers on Friday. Economists polled by Reuters estimated U.S. non-farm payrolls expanded by 125,000 in October and that the unemployment rate ticked up to 7.9 percent from 7.8 percent reported in September. The ADP report on private payrolls growth was postponed until Thursday from Wednesday. Other key data due on Thursday include weekly U.S. jobless claims figures, forecast at 370,000, and the Institute for Supply Management's manufacturing index, forecast to read 51.2, a number that would point to expansion in manufacturing. Analysts believe the impact of the superstorm could hurt this quarter's economic output, even if the blow to the economy is seen as a short-term one. After Friday's employment report, the market will deal with supply next week, noted Jefferies & Co vice president and money market economist Thomas Simons. ``The Treasury announced another $72 billion refunding package as expected,'' he said. The Treasury said it would sell $32 billion in three-year notes, $24 billion in 10-year notes, and $16 billion in 30-year bonds next week.