Prices little changed after Fed surprise, jobless claims

NEW YORK: Prices for US Treasuries traded nearly flat on Thursday, steadying after a jump in the previous session when the US Federal Reserve surprised markets by keeping its massive bond-buying program intact.

Markets had expected the Fed to slow its purchases of $85 billion per month in Treasuries and mortgage-backed securities. When policymakers decided to hold their buying pace steady, investors went on their own buying spree, pushing up prices for stocks and bonds around the world.

The Fed pointed to worries about the strength of the world's biggest economy in its decision, saying it wanted to wait for more proof of solid, sustainable growth.

A recent spate of mixed economic data have underscored the patchy nature of the US recovery, with jobs figures on Thursday reinforcing uncertainty.

While data showed jobless claims rose last week, backlogs in two states made it hard to get a clear read on the labor market's health.

"It's NFP (nonfarm payrolls) survey week, so it's going to go into everyone's model, so it matters. Are people going to put a standard of error around that? They should," said Ian Lyngen, senior government bond strategist at CRT Capital.

But the backlogs complicate estimating a path for next week's data, he said.

Benchmark 10-year notes slipped 1/32 in price to yield 2.695 percent, from 2.699 percent late on Wednesday. Those yields fell as low as 2.673 percent on Wednesday, the lowest since Aug. 13.

"The Fed might remain more cautious until growth actually materializes," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee, in a note to clients. "Expected growth is not quite the same thing as reality, it seems."

Thirty-year bonds dipped 1/32 in price to yield 3.749 percent, from 3.747 percent late on Wednesday.

Yields for benchmark 10-year notes have jumped more than 100 basis points from 1.60 percent at the beginning of May, when Fed policymakers first suggested they were eyeballing an exit to their extraordinary measures.

But while most analysts and economists thought the Fed was all but certain to taper on Wednesday, policymakers' surprise move caused a sharp turnaround in prices.

As part of its so-called quantitative easing purchase program, the Fed on Thursday will buy between $2.75 billion and $3.50 billion in notes due 2020 to 2023.