TREASURIES-Bonds climb on worries over pace of recovery

* June homes prices rise more than expected

* August consumer confidence also up more than forecast

* 30-year bond regains a good portion of Friday’s losses
(Adds strategist’s quote, updates prices)

By Chris Reese

NEW YORK, Aug 31 (BestGrowthStock) – U.S. Treasury debt prices rose
on Tuesday as persistent worries that the economic recovery is
faltering supported investor buying of lower-risk government
debt for a second straight day.

Price gains were reined in, however, after reports of a
rise in single-family home prices in June and an increase in
consumer confidence in August gave a modicum of solace to
investors reeling from a recent deluge of somber economic news.
Stocks reversed losses and gained slightly.

“There was pretty good follow-through buying (in
Treasuries) from yesterday in the overnight session, which gave
the market a bid, but the data today has been mixed to modestly
on the bond-bearish side,” said John Spinello, Treasury bond
strategist at Jefferies & Co in New York.

Benchmark 10-year Treasury notes (US10YT=RR: ) were trading
11/32 higher in price to yield 2.50 percent, down from 2.54
percent late on Monday, while the 30-year bond (US30YT=RR: ) was
20/32 higher to yield 3.55 percent from 3.59 percent.

The move, combined with Monday’s price gains, resulted in
the 30-year bond having clawed back a good chunk of its losses
from Friday, when the long bond suffered its biggest single-day
dip in 15 months.

Treasuries also got some support from month-end buying by
fund managers looking to align the length of maturities in
their portfolios to benchmark indices. However, a good portion
of month-end buying may have taken place on Monday, Spinello
said.

“We have had an amazing rally in two days after getting
white-washed on Friday, so I think there are people willing to
take profits in front of the extension — I think a lot of the
extension has taken place already,” he said.

Treasuries pared early gains after data showing prices of
single-family homes gained more than expected in June and rose
in the second quarter. They were further pulled back by the
rise in consumer confidence in August. For details see
[N31237504].

Separately, a dip in a gauge of Midwest business activity
in August was not far from expectations.

Investors sold Treasuries on Friday after Federal Reserve
Chairman Ben Bernanke did not signal in a speech in Jackson
Hole, Wyoming, that any quantitative easing program from the
U.S. central bank was immanent.

“The Treasury market is trading higher this morning as we
have all but gained back the price losses that were created on
Friday by the bond version of ‘irrational exuberance,'” said
Kevin Giddis, president of fixed income capital markets at
Morgan Keegan in Memphis, Tennessee.

“Between the economic numbers and a financial slap in the
face, traders and investors came back to their senses and
realized that we are still in a very slow growth pattern of the
economic recovery and consumers and employers are not anxious
to do much about it,” Giddis said.

Investors are waiting for the release on Tuesday afternoon
of minutes from the August 10 Federal Reserve policy-setting
meeting, with an eye on how divisive the debate was about how
to manage the central bank’s balance sheet.

At the end of the meeting the central bank said it would
buy Treasuries with funds from maturing mortgage holdings in an
effort to hold stable the size of its balance sheet.

Treasuries are also expected to be relatively range-bound
as investors look ahead to August non-farm payrolls data, due
on Friday. The median of forecasts from analysts polled by
Reuters is for a loss of 100,000 jobs in August, after payrolls
contracted by 131,000 in July.
(Reporting by Chris Reese; Editing by Dan Grebler)

TREASURIES-Bonds climb on worries over pace of recovery