Bonds up on technical support before key data, speakers

U.S. Treasurys

U.S. Treasurys prices rose from technical support levels on Wednesday as investors waited for U.S. employment data and speeches by major Federal Reserve officials due this week.

Prices for U.S. benchmark 10-year Treasury notes rose 8/32 in price while its yield eased to 2.647 percent from 2.67 percent late on Tuesday.

Two economic reports were supportive for Treasurys. The Mortgage Bankers Association said U.S. mortgage applications fell in the latest week. Consultants Challenger, Gray & Christmas said planned layoffs at U.S. firms rose 13.5 percent in October, citing cuts at pharmaceutical and financial firms.

But a 0.7 percent rise in The Conference Board's September leading economic indicators index released mid-morning appeared to trim gains at the long end of the maturity curve.

Strategists said the bond market was focused on more influential due later in the week: the first estimate of third-quarter gross domestic product (GDP) on Thursday and—most importantly—October nonfarm payroll data due Friday.

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Meanwhile, more technical factors were at work.

"The market is a bit hesitant around support levels,'' said Gennadiy Goldberg, U.S. strategist at TD Securities. "Ten-year yields broke through their 100-day moving average at 2.64 percent but were unable to break through 2.68 percent, the 38.2 percent retracement of the September-October rally.

''With GDP, payrolls, and both Dudley and Bernanke on the speaker circuit, there appears to be little desire by markets to prematurely break too far in one direction,`` Goldberg said.

A speech by New York Federal Reserve President William Dudley on Thursday and Fed Chairman Ben Bernanke's speech to the International Monetary Fund's research conference on Friday could get even more than the usual attention from market participants after recent Federal Reserve research papers discussed possible further changes in central banks' ''frameworks" to address issues raised by the financial crisis.

In research papers released this month, two of the Fed's top staff economists make the case for more aggressive action by the U.S. central bank to lower unemployment by promising to hold interest rates lower for longer.

Besides bouncing off support, Treasurys were supported by Japanese trust banks lifting hedges on a large block of ten-year futures, said Thomas di Galoma, co-head of fixed income rates at ED&F Man Capital in New York. ''Asian real money and central banks were also buyers."

The Treasury's refunding announcement—it will sell $30 billion in three-year notes, $24 billion in 10-year notes, and $16 billion for 30-year bonds next week—was much as expected and had no discernible market impact.

The Treasury also said it would sell two-year floating rate notes in 2014, with further details to be announced on Jan. 23.

Fed Bank of Cleveland President Sandra Pianalto will speak about housing and the national economy at 1:30 p.m. EST on Wednesday. No question and answer period is scheduled.

—By Reuters