TREASURIES-Prices gain as new home sales tumble
* U.S. new home sales sink to lowest in nine months
* Fed buys $3.215 billion in notes due 2022-2023
* Payrolls data will help guide views of Fed bond buy slowdown
NEW YORK, Aug 23 (Reuters) - Prices for U.S. Treasuries rose on Friday as disappointing home sales data underscored remaining weakness in the world's biggest economy, with some analysts scaling back views for a Fed exit from its massive bond-buying program. Sales of new single-family homes in America fell sharply in July to their lowest level in nine months, casting a shadow over the country's housing recovery. "The bond market is rallying because this is highlighting some of underlying weakness in the economy, which has been here all along but people have been ignoring," said Lindsey Piegza, chief economist with Sterne Agee & Leach in Chicago. "This report at least does not support the idea the Fed should remove any accommodation at this point," she added. Expectations that the U.S. Federal Reserve will soon pull back on its $85 billion per month of buying in Treasuries and mortgage-backed securities has sent yields soaring more than 100 basis points recently. Most economists in a Reuters poll now see the Fed slowing down those purchases at the next policy meeting on Sept. 17-18.
But the Fed has repeatedly emphasized that any such tapering will depend on data outlining the health of the world's biggest economy. Friday's figures, then, would not be indicative of the robustness the Fed wants.
"At face value, the higher mortgage rates are having an impact on the housing market. That makes tapering somewhat less likely," said Scott Brown, chief economist with Raymond James in St. Petersburg, Florida. But he noted that several more economic indicators will be released before Fed policymakers next meet on Sept. 17-18, including key nonfarm payrolls data for August. The benchmark 10-year note traded up 22/32 in price on Friday to yield 2.811 percent, down from 2.894 percent late on Thursday. Benchmark yields reached 2.936 percent on Thursday, marking the highest since late June 2011, according to Reuters data. The 30-year bond traded up 1-08/32 in price on Friday to yield 3.803 percent, from 3.876 percent late on Thursday. The August jobs data, due on Sept. 6, will be a key gauge of the health of the U.S. labor market. With policymakers looking for an unemployment rate closer to 6.5 percent, strong gains in jobs could help convince the Fed that the U.S. economy is ready to be weaned off the bank's support. The Fed's dependence on data was reinforced by minutes from the July meeting, released this week, some analysts said. "We view the minutes as remarkably short of details for a committee that allegedly is about to taper," wrote U.S. economist Michael S. Hanson of Bank of America Merrill Lynch. "Thus, we see the Fed making a game-day decision at their next meeting in September," he added. As part of its ongoing stimulus program, the Fed on Friday bought $3.215 billion of Treasuries maturing between February 2022 and August 2023. The Treasury's sale of $98 billion in new two-year, five-year and seven-year debt next week could add pressure to bond yields in the near term. Many investors have chosen to avoid taking new positions because of uncertainty leading into the Fed's September meeting.