TREASURIES-Prices fall on job growth but QE limits selling

* Stronger jobs picture over last three months hurts bonds

* October non-farm payroll additions higher than forecast

* Job count of the two prior months revised up

* Prices cut before next week’s refunding supply

* Prospective large Fed purchases curb sell-off
(Updates market action, comment)

By Ellen Freilich

NEW YORK, Nov 5 (BestGrowthStock) – U.S. Treasury debt prices fell
on Friday as stronger-than-expected U.S. employment data gave
traders a chance to cut prices before next week’s auction, but
the prospect of large purchases by the Federal Reserve in
coming months prevented a sharp sell-off.

The Labor Department reported stronger-than-forecast U.S.
job creation in October and upward revisions to August and
September job counts. The news curbed investors’ demand for
safe-haven U.S. government debt.

Price cuts also reflected traders’ efforts to make space
for next week’s quarterly refunding, at which the Treasury is
set to sell $72 billion in three-, 10- and 30-year debt.

The selling in Treasuries, however, gathered little
momentum, restrained by the prospect of large-scale purchases
by the Fed over the next eight months as the central bank tries
to grease the economy’s wheels.

At midday, benchmark 10-year Treasury notes (US10YT=RR: )
were down 13/32 in price, their yields rising to 2.53 percent
from 2.49 percent late on Thursday.

“In isolation, Treasuries could have sold off quite a bit
on these jobs data,” said Chris Molumphy, chief investment
officer, fixed-income, at San Mateo, California-based Franklin
Templeton, with $280 billion in fixed-income assets under
management. “However, the market is still digesting the
prospects of quantitative easing in the coming months.”

The Fed on Wednesday said it would buy $600 billion of
Treasuries in coming months to try “to foster maximum
employment and price stability.” It is expected to stick to
that plan because job growth is not robust enough to absorb new
workers or bring discouraged workers back into the work force.

“(Fed Chairman Ben) Bernanke has to keep doing what he’s
doing because even with what appears to be better-than-expected
private payroll gains, the unemployment rate (is high),” said
Cary Leahey, economist at Decision Economics in New York.

Non-farm payrolls rose 151,000 last month, more than double
economists’ consensus forecast, but the unemployment rate held
steady at 9.6 percent.

“Without getting the payrolls trajectory on a distinctly
higher path, you will not see a meaningful drop in
unemployment,” said Robert Tipp, chief investment strategist at
Prudential Fixed Income in Newark, New Jersey, with $240
billion in assets under management.

Thirty-year bonds (US30YT=RR: ) were down 27/32, their yields
rising to 4.11 percent from 4.06 percent on Thursday.

Earlier, the bond yield reached 4.18 percent, its highest
level since June 22.

The price move slightly steepened the Treasury yield curve;
the spread between two-year note yields and 10-year note yields
widened to 217 basis points from 216 basis points on Thursday.
(Editing by Dan Grebler)

TREASURIES-Prices fall on job growth but QE limits selling