TREASURIES-Prices rise on short-covering, Syria concerns
* Yields fall from two-year highs
* Fed seen tapering bond purchases at next week's meeting
* Treasury to sell $65 billion of three-, 10-, 30-year bonds
NEW YORK, Sept 9 (Reuters) - U.S. Treasuries prices rallied on Monday as some investors covered bearish bets that yields are likely to continue to rise, while concerns over potential conflict with Syria was also seen adding some safety buying to U.S. debt. Benchmark 10-year note yields have fallen from two-year highs of 3 percent since Friday's employment report showed that employers added fewer jobs than expected in August, while jobs gains for June and July were also revised downward.
The Federal Reserve is seen as likely to announce a reduction in its $85 billion a month bond purchase program when its policymakers meet next week, though Friday's payrolls data has led some to expect the initial reduction may be smaller than had been previously expected. "The market is still under the impression that the Fed will announce some sort of tapering next week, albeit the expectations are for a little lower than previously thought," said Jason Rogan, managing director in Treasuries trading at Guggenheim Partners in New York. Most economists at primary dealers expect the Fed will announce a cut in bond purchases, according to a Reuters poll on Friday. The median of forecasts from the 18 dealers was for the central bank to initially shave $15 billion per month from the purchases, down from a median forecast of $18 billion dollars in a similar Aug. 2 poll and a median of $20 billion in a poll of 15 dealers in early July. Benchmark 10-year notes were last up 12/32 in price to yield 2.89 percent, down from 2.94 percent late on Friday. The notes had initially rallied strongly on Friday's employment report before giving back much of the gains later in the session. The Fed will buy between $1.25 billion and $1.75 billion in bonds due 2036 to 2043 on Monday as part of its ongoing purchase program. Concerns over Syria also added a bid to the debt on Monday. Syrian President Bashar al-Assad denied that he was behind a chemical weapons attack on the Syrian people, as the White House on Sunday pressed ahead with the uphill effort of persuading Congress to approve a military strike to punish Assad.
The Treasury will sell $65 billion in new three-year, 10-year and 30-year bonds this week, which may add some pressure to the market.