TREASURIES-Prices dip, Tuesday's payrolls data in focus

Karen Brettell
Monday, 21 Oct 2013 | 9:01 AM ET

* September payrolls data on Tuesday next market focus

* Fed to buy $3 bln-$4 bln notes due 2019 and 2020

* Overnight repo costs normalizes at around 0.07 pct

NEW YORK, Oct 20 (Reuters) - U.S. Treasuries prices dipped on Monday before Tuesday's release of employment data for September, after a more-than two week, partial government shutdown delayed economic releases and increased concerns that the closures will weigh on growth. Lawmakers late on Wednesday increased the U.S. debt ceiling until February and reopened the government, turning the market focus back to when the Fed is likely reduce its $85 billion-a-month bond buying program. The lack of data, however, has muddied insight into economic strength and has pushed back expectations over when the Fed is likely to begin to taper to the first quarter of next year. The payrolls report was originally scheduled for release on Oct. 4. "The expectations are probably that it has a better chance of being stronger because it was pre-government shutdown," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York. Comiskey sees reaction to the report as likely to be muted because of the delay in its release. This will give greater importance will be the payrolls report for October, to be released on Nov. 8, after being originally scheduled for Nov. 1. "I think the market is already looking at the report for October, that will be more important in terms of what the near-term is, and also Fed policy," Comiskey said. Benchmark 10-year notes were last down 2/32 in price to yield 2.60 percent, up from 2.59 percent late on Friday. The yields rose as high as 3 percent on September 5, before the Fed surprised investors by keeping the size of its bond purchase program unchanged. Among other data the department rescheduled was the consumer price index for September, which will now be released on Oct. 30, and the producer price index for September, now due on Oct. 29. Chicago Fed President Charles Evans said on Monday that it will likely take months to sort out the picture of the Labor market and that a tapering of bond purchases may begin later because of the budget battle in Washington. The Fed will buy between $3 billion and $4 billion in notes due 2019 and 2020 on Monday as part of its ongoing purchase program. The cost of borrowing overnight against Treasuries traded back at more normal levels, at around 0.07 percent on Monday. An influx of cash as investors returned to the market had sent the cost of borrowing against Treasuries into negative levels, around minus-0.10 percent, late on Friday. Concerns about taking possession of Treasuries bills that were at risk of a U.S. default had disrupted the repo market before Wednesday's agreement to raise the debt ceiling, making it more expensive to obtain the loans.