TREASURIES-Bond prices near flat as investors eye election
NEW YORK, Nov 2 (Reuters) - Prices for long-dated U.S. Treasuries traded near flat on Friday, paring losses after a strong jobs report, on uncertainty about next week's presidential election. Despite spending much of the day down after the Labor Department's report that job growth in October exceeded the most optimistic forecasts, prices for 30-year bonds edged slightly higher late on Friday. The reversal in prices came as stocks sank, with key U.S. equity indexes off more than 1 percent. But investors were also looking to next Tuesday's election, in which President Barack Obama and Republican Mitt Romney will square off. While Romney's gains in the polls in recent weeks had made the contest ``more of a horse race,'' said William O'Donnell, head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut, that momentum seems to have slowed. As a result, investors have shed risk as they wait to see how the vote goes, he said. ``That has remained a theme, people on the sidelines, not wanting to play,'' he added. Longer-dated Treasuries had fallen early in the session after the U.S. jobs report suggested an economic recovery could be gathering steam, albeit slowly, eventually leading to consumer price increases. The U.S. Labor Department said employers added 171,000 people to payrolls in October and that 84,000 more jobs were created in August and September than earlier estimated. But the workweek length and hourly wages remained flat. ``If the economy is improving, the bond market reads into that that we could have a little more inflation, and that adversely affects long-term bonds more than short-term Treasuries,'' said Jeffrey Cleveland, senior economist at Payden & Rygel, in Los Angeles. But that changed as the session wore on. ``You certainly had people lined up waiting to sell on the strong number this morning,'' said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee. ``What was so surprising was how quickly people began to buy.'' Thirty-year Treasury bonds reversed early losses to trade up 01/32, their yields at 2.906 percent from 2.91 percent late on Thursday. Analysts said a win for Obama could be positive for bonds, whereas a Romney win could boost equities. ``We expect the knee-jerk reaction in financial markets to be positive (risk on) if Romney wins and muted if Obama is re-elected,'' said Signe Roed-Frederiksen of Danske Bank. ``Focus will quickly shift to the negotiations about the fiscal cliff as Congress convenes again in the lame duck session.'' The stronger-than-expected October jobs report, a shortened week after the massive storm Sandy hit New York and a push by issuers to get deals through before next week's presidential election boosted issuance in the U.S. investment-grade market, IFR reported. Eleven new deals were announced, including a three-part benchmark deal from Microsoft, a $2 billion deal from health insurer Aetna and a benchmark four-part deal from Verizon. ``With Hurricane Sandy, we ended up with the transactions scheduled over the course of this week jammed into the last two days, and with positive payroll numbers and elections on Tuesday, everyone felt like they should take the risk off the table and do their deal today,'' said the head of debt capital markets at a big U.S. bank.