TREASURIES-Prices gain as market awaits U.S. jobs data later in week

Luciana Lopez
Monday, 4 Nov 2013 | 11:42 AM ET

* U.S. capital goods orders sank more than expected in September

* October nonfarm payrolls due Friday, GDP due Thursday

* U.S. Treasury quarterly refunding announcement due Wednesday

NEW YORK, Nov 4 (Reuters) - U.S. Treasury debt prices rose slightly on Monday, retracing some of Friday's losses and hemming yields within recent ranges as investors looked ahead to key data later in the week as well as information on upcoming Treasury debt sales. Treasuries sank on Friday after stronger-than-expected factory activity data belied views that the economy struggled last month in the face of a partial shutdown of the federal government during the first half of October. While the shutdown was expected to drag on the economy, the manufacturing data suggested the damage might have been contained. Data this week may confirm that resilience or could underscore the vulnerability of the economy. "There's a lot of short-term risk, depending on whether data surprises to the upside," said Robert Tipp, chief investment strategist at Prudential Fixed Income, in Newark, New Jersey. Data early in the week disappointed as orders for a wide range of U.S.-made capital goods sank more than previously estimated in September, a sign that companies cut their investment plans sharply as Washington hurtled toward the brink of default. "The area of concern is non-defense cap orders ex-aircraft," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. "It's pretty weak in August and September. For GDP, it's a proxy on business and consumer spending, and it implies pretty lackluster growth," he said. U.S. third-quarter gross domestic product data are due on Thursday. Those figures will help show how strong momentum was in the economy before the government shutdown in October, which was sparked by Republican efforts in Congress to undermine President Obama's signature healthcare law as a condition of funding the government. And on Friday, the closely-watched October nonfarm payrolls will be released. These key U.S. economic reports were delayed because of the shutdown and are among the most important data for weighing future Federal Reserve monetary policy. Fed policymakers want to see the unemployment rate dropping closer to 6.5 percent from the current 7.2 percent, but economists in a Reuters survey expect that rate to have edged up in October to 7.3 percent. The Fed recently kept in place its $85-billion-per-month of mortgage-backed securities and Treasuries buying, although a statement from policymakers concluding a two-day meeting had a more hawkish tinge than some had expected. As a result, analysts broadly expect the Fed to begin tapering those asset purchases later than expected, perhaps well into 2014 rather than by the end of this year. Treasuries could remain rangebound in coming sessions, with investors reluctant to take on large positions until they have more certainty on the momentum in the economy. "This week, neutral data should lead to a 2.50 percent to 2.75 percent trading range on 10-year notes," said Chris Bury, head of U.S. rates trading and sales at Jefferies & Co. Prices for U.S. benchmark 10-year Treasury notes rose 7/32 in price on Monday to yield 2.596 percent, compared to a yield of 2.62 percent late on Friday. The U.S. 30-year bond rose 9/32 in price to yield 3.680 percent, compared to a yield of 3.696 percent late on Friday. In addition, the U.S. Treasury on Wednesday will issue its quarterly refunding announcement, which will lay out funding needs for the next quarter and tell investors how much U.S. debt will be auctioned off by the government. The Federal Reserve on Monday bought $3.718 billion in Treasuries maturing August 2019 through June 2020 as part of its ongoing stimulus program.