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Treasuries Hold Gains as Employment Data Support Fed Purchases

Jan. 7 (Bloomberg) -- Treasuries held gains from the end of last week after the U.S. unemployment rate was higher than forecast, boosting speculation the Federal Reserve’s bond-buying efforts to stimulate the economy won’t end anytime soon.

The U.S. plans to sell $32 billion of three-year notes, $21 billion of 10-year securities and $13 billion of 30-year bonds over three days starting tomorrow. The amounts are unchanged from the last time the government issued this combination of securities in December.

Benchmark 10-year yields held at 1.89 percent as of 10:03 a.m. in Tokyo, based on Bloomberg Bond Trader prices. The 1.625 percent note maturing in November 2022 changed hands at 97 19/32. The yield fell one basis point, or 0.01 percentage point, on Jan. 4.

“I can’t see yields going above 2 percent over the next few months,” said Ali Jalai, who trades U.S. debt in Singapore at Scotiabank, a unit of Bank of Nova Scotia, one of the 21 primary dealers that trade directly with the Fed. “The U.S. economy is growing. It’s not accelerating and it’s not falling apart.”

The U.S. unemployment rate was 7.8 percent last month, the Labor Department reported on Jan 4. It revised November’s jobless rate to 7.8 percent from 7.7 percent.

The U.S. gained 155,000 jobs in December, following a revised 161,000 advance in November that was more than initially estimated, the Labor Department reported.

After its December meeting, the Fed announced Treasury purchases of $45 billion a month in addition to $40 billion a month of mortgage-debt purchases begun in September, bringing the total pace of bond buying to $85 billion a month.

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