TREASURIES-U.S. bond prices rise on shutdown, private jobs data
* U.S. Sept private jobs growth misses forecast
* One-year U.S. CDS price rises to highest since 2011
* U.S. to sell $20 billion in seven-day cash management bills
* Fed to buy $3 billion to $4 billion in medium-term Treasuries
NEW YORK, Oct 2 (Reuters) - U.S. government debt prices rose on Wednesday as worries about a protracted government shutdown and data suggesting sub-par job growth rekindled bids for bonds and supported the view the Federal Reserve won't reduce stimulus in the near future.
The first partial federal shutdown in 17 years began on Tuesday due to a stalemate between the two major U.S. political parties over the federal budget and healthcare reform. There has been little progress toward a deal that will return all government services and up to one federal million workers to their jobs.
Economists forecast each week of a shutdown would shave 0.1 percentage point from economic growth. Deutsche Bank said late Tuesday the growth reduction could intensify to 0.2 percentage point a week if the shutdown lasts longer than two weeks.
"This keeps the Fed at bay for the moment," said Robbert van Batenburg, director of market strategy with Newedge USA LLC in New York.
Benchmark 10-year Treasury notes gained 8/32 in price for a yield of 2.619 percent, down 3 basis points from late on Tuesday. The 10-year yield was about 3 basis points above the seven-week low set last week when traders added bond holdings in anticipation of the shutdown.
On Wall Street, stocks opened broadly lower with the Standard & Poor's 500 index last down 0.6 percent.
With federal agencies scaling back their operations, the Labor Department has said it will not release its closely watched monthly payrolls report, originally scheduled for Friday, during the shutdown. This meant traders will rely on privately produced indicators to gauge the economy.
Payroll processor ADP said on Wednesday U.S. companies added 166,000 jobs in September, fewer than the 180,000 projected by economists polled by Reuters. This compared with a downwardly revised 159,000 gain in August.
Earlier, the Mortgage Bankers Association said applications for home loans held steady last week, as lower interest rates stabilized credit demand to refinance and to buy a home.
As U.S. economy showed moderate growth before the government shutdown, it remains vulnerable to a possible federal default if the squabble between Democrats and Republicans prevents a deal to raise the statutory $16.7 trillion debt limit, which is set to run down on Oct. 17.
"When it comes to the debt ceiling, it will have grave implications for the U.S. on its creditworthiness and credit rating," Batenburg said.
Concerns over a U.S. default have manifested in the credit default swaps market where the cost to insure Treasuries has jumped in recent days.
Investors would pay about 33,600 euros to insure 10 million euros worth of Treasuries for a year on Wednesday, according to Markit. This was highest premium on one-year U.S. sovereign debt since two years ago during the first debt ceiling showdown between President Barack Obama and top Republican lawmakers.
The price on five-year U.S. CDS rose to its highest in nearly six months. Investors would pay $34,200 euros annually to insure 10 million euros worth of U.S. government debt, up from 32,000 euros on Tuesday.
Interest rates on Treasury bills that will come due in the between the debt ceiling deadline and the end of October fell on the day but remained elevated than other T-bill issues on default jitters.
The rate on the T-bill issue due on Oct 31 slipped 1.5 basis points to 0.076 percent. This compared with the a 0.035 percent on the interest rate on the T-bill due the following week.
The Treasury Department plans to sell $20 billion in seven-day debt at 11 a.m. (1500 GMT), which traders expect will fetch an interest rate of 0.035 percent.
In the meantime, the Fed plans to buy $3 billion to $4 billion in Treasuries due in July 2019 to September 2020, which will be part its intended $45 billion purchases of government debt in October.