NEW YORK: US Treasuries prices fell on Monday before Tuesday's release of September employment data, whose issuance was delayed by the 16-day partial government shutdown which clouded the US economic outlook.
Lawmakers late last Wednesday increased the US debt ceiling until February and reopened the government, turning the market focus back to when the Fed is likely reduce its $85 billion-a-month bond buying program.
The shutdown turned the spigot off of much US economic data. Its dearth muddied insight into economic strength and has pushed back expectations over when the Fed is likely to begin to taper to the first quarter of next year. The payrolls report was originally scheduled for release on Oct. 4.
"The (data) expectations are probably that it has a better chance of being stronger because it was pre-government shutdown," said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York.
Market reaction to the number may be limited, however, because of the delay in its release. The payrolls report for October, to be released on Nov. 8, after being originally scheduled for Nov. 1, will be of greater importance.
"I think the market is already looking at the report for October, that will be more important in terms of what the near-term is, and also Fed policy," Comiskey said.
On Monday, benchmark 10-year notes were last down 5/32 in price to yield 2.61 percent, up from 2.59 percent late on Friday. The yields rose as high as 3 percent on Sept. 5, before the Fed surprised investors by keeping the size of its bond purchase program unchanged.
Among other data the department rescheduled was the consumer price index for September, which will now be released on Oct. 30, and the producer price index for September, now due on Oct. 29.
Data on Monday showed that US home resales fell in September and prices rose at their slowest pace in five months, a sign that higher mortgage rates may be taking some edge off the housing recovery.
Chicago Fed President Charles Evans said on Monday that it will likely take months to sort out the picture of the labor market and that a tapering of bond purchases may begin later because of the budget battle in Washington.
The Fed bought $3.69 billion in notes due 2019 and 2020 on Monday as part of its ongoing purchase program.
The cost of borrowing overnight against Treasuries traded back at more normal levels, at around 0.06 percent on Monday.
An influx of cash as investors returned to the market had sent the cost of borrowing against Treasuries into negative levels, around minus 0.10 percent, late on Friday.
Concerns about taking possession of Treasuries bills that were at risk of a US default had disrupted the repo market before Wednesday's agreement to raise the debt ceiling, making it more expensive to obtain the loans.
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