TREASURIES-Yields lowest in three months as jobs data disappoints
* Sept. nonfarm payrolls rise by 148,000, less than expected
* Fed seen unlikely to taper before 2014
* Fed buys $1.56 bln bonds due 2036-2043
* Three-month Libor falls to record low 0.23835 pct
NEW YORK, Oct 22 (Reuters) - U.S. Treasuries yields fell to the lowest in three months on Tuesday after data showed that U.S. employers added far fewer workers than expected in September, reducing expectations that the Federal Reserve could taper its bond purchases this year. Nonfarm payrolls increased by 148,000 last month, the Labor Department said on Tuesday. While the job count for August was revised to show more positions created than previously reported, employment gains in July were the weakest since June 2012.
But there was some sign of a silver lining in the report, with the unemployment rate dropping a tenth of a percentage point to 7.2 percent, the lowest since November 2008. "This really does push us into a January, February mode (for tapering) and if there is a shutdown possibly even further," said Aaron Kohli, an interest rate strategist at BNP Paribas in New York. Economists polled by Reuters had expected that U.S. employers added 180,000 workers in September, up from 169,000 in August, while the jobless rate was seen steady at 7.3 percent. Benchmark 10-year notes were last up 19/32 in price to yield 2.54 percent, the lowest since July 24 and down from 2.58 percent before the data was released. The yields have fallen from 3 percent on Sept. 5, before the Fed surprised investors by keeping the size of its bond purchase program unchanged. "It's kind of ugly. It's kind of disappointing," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee. "It keeps QE alive and bonds will like it and so might stocks. This is positive for all asset prices." An improving jobs picture is key to the Fed reducing its $85 billion-a-month bond-purchase program, which is meant to stimulate growth and cut the jobless rate. The Fed bought $1.56 billion in bonds due from 2036 and 2043 on Tuesday as part of its ongoing purchases. The jobs data for September was delayed by the 16-day partial federal government shutdown. It was originally scheduled for release on Oct. 4. The shutdown delayed a number of U.S. economic releases, muddying insight into the economy's strength and pushing back expectations on when the Fed is likely to begin to taper until the first quarter of 2014. Data over the coming months is expected to reflect uncertainties about the effects of the shutdown, the debate over fiscal policy and concerns about raising the debt ceiling only until February, given fears of renewed political conflict and another possible shutdown as that deadline approaches. The release of the October payrolls report has been pushed back to Nov. 8 from Nov. 1. Other data the government has rescheduled includes 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.
Foreigners soured on long-term U.S. securities in August, shedding both U.S. government bonds and stocks, U.S. Treasury data showed on Tuesday. In the short-term markets, relief over the debt ceiling being lifted continued to bring cash back to short-term loans, sending down rates. The benchmark three-month London interbank offered rate dropped to a record low 0.23835 percent on Tuesday. Data on Tuesday also showed that foreign Treasury holdings fell by $10.8 billion in August. China, the largest foreign U.S. creditor, saw its holdings decline $11.2 billion to $1.268 trillion.