TREASURIES-Prices fall, Tuesday's payrolls data in focus

* September payrolls data on Tuesday next market focus

* Fed buys $3.69 bln notes due 2019 and 2020

* Overnight repo costs normalize at around 0.06 pct

By Karen Brettell

NEW YORK, Oct (KOSDAQ: 039200.KQ - news) 21 (Reuters) - U.S. 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 U.S. economic outlook.

Lawmakers late last Wednesday increased the U.S. 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 U.S. 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 (Other OTC: BKSHF - news) 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 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 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 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.