TREASURIES OUTLOOK-U.S. bond prices slip as focus shifts to jobs data

* Traders look to delayed U.S. Sept jobs data for direction

* Treasury bill auction rates recede after debt ceiling deal

* Overnight repo costs normalize at around 0.06 pct

* Fed buys $3.69 bln of notes due 2019 and 2020

(Repeats to additional subscribers)

By Karen Brettell and Richard Leong

NEW YORK, Oct (KOSDAQ: 039200.KQ - news) 21 (Reuters) - U.S. Treasuries prices fell on

Monday, a day ahead of the release of the government's September

employment data, which was delayed by the 16-day partial federal

government shutdown.

Following a rally last week that sent benchmark yields to

their lowest levels since late July, traders refrained from

taking big bets, analysts said.

"We had a good rally with the bond market on expectations of

softer data after the shutdown and less risk of a U.S. default.

Now with the debt ceiling debate abated, there will be focus

back on the data," said Robert Tipp, chief investment strategist

at Prudential Fixed Income in Newark, New Jersey.

Last Wednesday, U.S. lawmakers increased the $16.7 trillion

debt ceiling until Feb. 15 and reopened the government, turning

the market focus back to when the Fed is likely reduce the pace

of its $85 billion-a-month in bond purchases.

The government shutdown turned the spigot off for much U.S.

economic data, muddying insight into the economy's strength and

pushing back expectations on when the Fed is likely to begin to

taper until to the 2014 first quarter. The payrolls report was

originally scheduled for release on Oct. 4.

"The expectations are probably that (the jobs report) 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 (Other OTC: BKSHF - news) in New York.

Economists polled by Reuters expect that U.S. employers

added 180,000 workers in September, up from 169,000 in August,

while the jobless rate is seen having held steady at 7.3

percent.

Market reaction to the number may be limited, however,

because of the delay in the release. The October payrolls

report, whose release has been pushed back to Nov. 8 from 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 below-average volume, benchmark 10-year notes

were last down 6/32 in price to yield 2.607 percent, up 2 basis

points late on Friday. The yield rose as high as 3 percent on

Sept. 5, before the Fed surprised investors by keeping the size

of its bond purchase program unchanged.

The 30-year bond fell 18/32 in price with a

yield of 3.681 percent, up 3 basis points from late Friday.

Among other data the government has rescheduled are 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.

Industry data on Monday showed that U.S. 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 bond-buying program.

In addition, short-term interest rates fell further in the

wake of the temporary debt deal in Washington. 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 U.S. default had disrupted the repo market

before Wednesday's agreement to raise the debt ceiling, making

it more expensive to obtain the loans.

The Treasury on Monday sold a combined $65 billion worth of

three-month and six-month bills at interest rates lower than

last week's levels prior to the debt ceiling extension. Demand

at these T-bill auctions rebounded from the lows last seen in

2009.

The Treasury will sell $35 billion in one-month bills

on Tuesday, up from $20 billion last week after

the debt deal.

(Reporting by Richard Leong; Editing by Theodore d'Afflisio, W

Simon and Leslie Adler)