TREASURIES-Yields rise on payrolls anxiety, heavy data week

Karen Brettell
Monday, 2 Dec 2013 | 9:20 AM ET

* Yields rise before heavy week of economic data

* Investors nervous before Friday's payrolls report

* Data in focus for signs of when Fed will begin taper

NEW YORK, Dec 2 (Reuters) - U.S. Treasuries yields rose on Monday as investors took a cautious stance ahead of a heavy week of data, culminating in Friday's highly anticipated November employment report, which will be scoured for signals about the Federal Reserve's future decisions.

Investors are evaluating when the Fed is likely to view the economic recovery as being strong enough to begin paring its $85 billion-a-month bond purchase program, after the U.S. central bank in September surprised investors, who were expecting a cut in purchases, by leaving it unchanged.

The Fed is now seen by most as likely to begin reducing purchases in its March meeting. Some think that could be brought forward to January if data comes in strong and some are even speculating that the Fed could move as soon as this month.

"It's all defense into Friday's number," said Tom Tucci, head of Treasuries trading at CIBC in New York.

Investors have often become anxious heading into a payrolls report, seeing a risk that a large jobs number could be the spark that starts the Fed pullback. Tucci said it is more likely that the central bank will provide more guidance over how they plan to hold rates low for some time to come.

"I think what they want to do is outline a plan, reinforce the lower for longer with the idea that that's going to drive a foundation in the market that won't allow rates to move up too dramatically," he said.

Benchmark 10-year notes were last down 9/32 in price to yield 2.78 percent, up from 2.74 percent on Friday. Thirty-year bonds fell 17/32 in price to yield 3.84 percent, up from 3.82 percent.

The debt showed little reaction to data showing that U.S. manufacturing growth rebounded from a one-year low in November, while factory output grew at its fastest pace in 20 months.

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. It will purchase debt every day this week, including two buybacks on Tuesday.

Expectations of heavy corporate debt issuance before the year-end holiday period also weighed on Treasuries as dealers and investors made way to absorb the new debt.

Bonds had been boosted through Friday by month-end buying by portfolio managers that rebalance holdings against benchmark indexes.