TREASURIES-Bond prices gain after Fed plans to keep buying bonds
* Fed statement offers no hint of a pullback in bond buys
* ADP private-sector employment higher than predicted
* Second-quarter GDP growth at 1.7 percent - exceeds forecast
* Treasury announces $72 billion August refunding package
NEW YORK, July 31 (Reuters) - Prices for U.S. Treasuries rose on Wednesday, reversing early losses after the Federal Reserve gave no hint of a pullback in bond buying at the end of a two-day policy meeting. The Fed said the U.S. economy continues to recover but still needs support. For now, the U.S. central bank will keep buying $85 billion in mortgage and Treasury securities per month to bolster the still challenged economy. "There were no big changes in the policy stance of the Fed," said Michael Moran, chief economist of Daiwa Securities America in New York. The Fed's mention of growth as modest, rather than moderate, as well as concerns about higher mortgage rates point to a steady path for the so-called quantitative easing program, he said. "If you are concerned about downside risks in the housing market, which is supposed to be an engine of growth, you're not going to taper until you're confident you have withstood those challenges," Moran added. The benchmark 10-year Treasury note gained 6/32 in price to yield 2.586 percent. The yield had risen as far as 2.702 percent earlier in the session. The 30-year bond rose 16/32 in price, yielding 3.644 percent. Yields have shot up since May, when policymakers began suggesting that the Fed could slow the pace of its asset buying as the economy grows stronger. But Fed speakers in recent weeks have sought to reassure markets that, even if the bank tapers its buying, interest rates will stay low for a while yet. Chairman Ben Bernanke himself has emphasized that the Fed's decisions will depend on data on the health of the world's biggest economy, and those data have been mixed. "We don't see any reason, based on the data coming in, for the Fed to taper purchases in September," said Steve Van Order, fixed-income strategist with Calvert Investments in Bethesda, Maryland. While the U.S. economy grew at a faster-than-expected rate in the second quarter, the first quarter's expansion was revised down. "The second-quarter number came in higher at the expense of the first quarter," said Jacob Oubina, senior economist at RBC Capital Markets in New York. Payroll processor ADP said on Wednesday that U.S. private-sector employers added 200,000 jobs in July. More clarity on the health of the labor market will come on Friday with the government's release of July U.S. nonfarm payrolls data. Fed policymakers want to see the U.S. unemployment rate closer to 6.5 percent than its current 7.6 percent before raising interest rates from historic low levels. So investors are anxious to get a feel for whatever momentum might be gathering in the beleaguered jobs market. The Treasury also released a quarterly refunding statement on Wednesday, saying auction sizes of two- and three-year notes will shrink in coming months because improving government finances have reduced the need for debt financing.
In addition, the Treasury said it expected to hold its first floating-rate note auction in January 2014.