TREASURIES-Prices gain before double Fed purchases

Karen Brettell
Monday, 9 Dec 2013 | 9:05 AM ET

* Fed to buy bonds in two buybacks, prices rise

* Treasury to sell $64 bln in 3, 10, 30-yr notes this week

* Fed meeting next week in focus for signs of tapering

NEW YORK, Dec 9 (Reuters) - U.S. Treasuries prices edged up on Monday before the Federal Reserve planned to make two separate bond purchases and as investors focused on when the U.S. central bank is likely to pare back this $85-billion-a-month buying program. The Fed will buy between $1.25 billion and $1.75 billion in bonds due between 2036 and 2043 as well as $2.75 billion and $3.50 billion in notes due 2021-2023 on Monday as part of its ongoing purchases. The buybacks are helping support the market even as many investors remain nervous over when the U.S. central bank is likely to scale back purchases. Stronger economic data, including Friday's employment report, have led many investors and analysts to bring forward expectations on when the Fed could taper to January and many traders have begun pricing for the possibility that the Fed could act as early as next week when the Fed meets for the final time this year. Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee, sees the market as pricing in an approximate 75 percent chance of tapering this month. If the Fed does not act, traders will then be scouring the language from next week's Fed statement to see if a move in January is likely, he said. "We're almost at the point now where the market will be ready, particularly once it gets past the auctions this week, to start really thinking about interpreting the Fed," Vogel said. Benchmark 10-year notes were last up 4/32 in price to yield 2.85 percent, down from 2.88 percent late on Friday. The Federal Reserve will begin reducing its massive bond-buying program no later than March, according to a Reuters poll of 18 of the 21 primary dealers conducted Friday.

With a relatively light economic calendar, the Treasury's sale of $64 billion in new coupon-bearing debt this week will likely take focus this week. The sales will include $30 billion in three-year notes on Tuesday, $21 billion in a 10-year reopening on Wednesday and $13 billion in a 30-year reopening on Thursday. Retail sales data on Thursday will also be watched for signs of strength in consumer spending.