TREASURIES-Bond prices fall after ADP, Q2 GDP; Fed statement eyed
* ADP private-sector employment higher than predicted
* Second-quarter GDP growth exceeds forecast at 1.7 percent
* Treasury announces $72 billion August refunding package
* Fed statement later to be scrutinized for timing of tapering
NEW YORK, July 31 (Reuters) - U.S. Treasuries prices slid on Wednesday after reports showing economic growth accelerated in the second quarter and private- sector employment grew more than forecast in July arguably inched the Federal Reserve a step closer to cutting back its monetary stimulus. U.S. Treasuries opened lower and widened losses when payroll processor ADP said private-sector employers added 200,000 jobs in July. Treasury debt prices slid further when the government reported U.S. gross domestic product (GDP) grew at a stronger-than-forecast annualized rate of 1.7 percent in the second quarter. Prices deteriorated mainly on the premise that better-than-forecast data could bring the Fed a step closer to reducing its monetary stimulus. "Both ADP and GDP were stronger than expected, which led to a sell-off in the U.S. Treasury market," said Eric Stein, co-director of global income at Eaton Vance Investment Managers in Boston. "All eyes are now squarely focused on the FOMC today and the July payrolls data on Friday." Still, the selloff was not dramatic. The benchmark 10-year U.S. Treasury note dropped 17/32 in price, its yield rising to 2.68 percent from 2.61 percent late on Tuesday. The 30-year bond fell 18/32, its yield rising to 3.72 percent from 3.68 percent late on Tuesday. The Q2 GDP data still pointed to "sluggish" Q3 growth, which should "stay (the Fed's) hand from tapering very soon," said Cary Leahey, senior adviser to Decision Economics in New York. "Inventories may have to be worked off, and more sequester-related wage and spending cuts are unfolding in July," he noted. "Even if this Friday's jobs report is close to the 200,000 jobs disclosed in today's ADP report, the Fed is more likely to ask for a plan to be made ready for a vote in September for action later in the year," Leahey said. Other bond strategists also were skeptical that the GDP data was a rallying cry for tapering. CRT Capital Group senior government bond strategist David Ader said the Q2 GDP was "a wash" when seen in the light of revisions to first quarter growth, and would not "accelerate" any plans the Fed might have to trim its bond purchases. "The Q2 price data (was) very (bond) friendly," he added. The Q2 core personal consumption expenditure (PCE) index was up an annualized 0.8 percent in the second quarter. The Treasury's refunding announcement had little discernible market impact. The Treasury said its $72.0 billion refunding package would be comprised of a $32 billion 3-year note auction, a $24 billion 10-year note sale, and a $16.0 billion 30-year bond auction, scheduled for next Tuesday, Wednesday and Thursday, respectively. "Although there were no changes in auction sizes for the refunding, Treasury did say they expect to 'gradually decrease' auction sizes over the coming quarter, with the reductions likely to take place in the 2-year and 3-year auctions," said John Canavan, senior analyst at Stone & McCarthy Research Associates in Princeton, New Jersey. The Treasury also said it expected to hold its first floating rate note auction in January 2014. As the market sifted through the implications of the Q2 GDP report, it also settled into a waiting mode in the hours before the Federal Reserve ends a two-day meeting by issuing a policy statement. Its words will be parsed for guidance on when the Fed might begin to scroll back on the large-scale bond purchases that have been part of its monetary stimulus strategy. Fed officials, including Chairman Ben Bernanke, have spoken of a pullback, remarks that have driven up yields since May. News that the pace of business activity in the U.S. Midwest picked up modestly in July, though growth in new orders and employment both cooled, briefly appeared to put some additional downward pressure on bond prices. The Institute for Supply Management-Chicago business barometer rose to 52.3 from 51.6, though it fell short of economists' expectations for an increase to 54.0. A reading above 50 indicates expansion in the regional economy.