TREASURIES-Prices climb on U.S. labor market worries

Thu Apr 26, 2012 10:34am EDT

Related Topics

* Weekly US jobless claims higher than expected
    * Treasury to sell $29 bln of 7-year notes
    * European credit worries support prices


    By Chris Reese	
    NEW YORK, April 26 (Reuters) - U.S. Treasury debt prices
rose on Thursday after higher-than-expected new claims for
jobless benefits in the latest week suggested the labor market
continues to struggle to make any recovery.	
    The Federal Reserve is likely to stay highly accommodative
in its monetary policy as long as unemployment remains at
current lofty levels above 8 percent, and the latest jobless
claims data fueled the appetite for lower-risk assets like U.S.
government debt.	
    "Higher-than-expected initial jobless claims in the week
ended April 21 and an upward revision to the prior week put into
question the improving trend on the layoff front. It adds to
concern about backsliding in job creation after faster
employment gains earlier in the year," said Jonathan Basile,
director of economics at Credit Suisse in New York.	
    Benchmark 10-year notes traded 8/32 higher in
price to yield 1.94 percent, down from 1.98 percent late
Wednesday, while 30-year bonds were 20/32 higher to
yield 3.11 percent from 3.15 percent.	
    Treasuries began the day with support from safety bidding
related to ongoing worries about contagion from the debt crisis
in Europe. The yield on Spanish 10-year debt rose to
about 5.86 percent, just under the 6 percent level that is seen
as unsustainable.	
    "The bid started overnight with further concerns in Europe,
notably in Spain and Italy today, and has continued in the New
York session with the market, notably intermediates on out, on
almost a direct path higher in price," said Justin Lederer,
Treasury strategist at Cantor Fitzgerald in New York.    	
    The Fed held policy steady on Wednesday and reiterated its
expectation that interest rates would not rise until late 2014.
Chairman Ben Bernanke said at his post-meeting news conference
that he was comfortable with the central bank's policy stance,
although he said it was prepared to do more to aid the U.S.
economy if needed. 	
    The Treasury will sell $29 billion of new seven-year debt 
later in the day. A sale of $35 billion of five-year notes on
Wednesday met robust demand, with strong interest from foreign
central banks and other indirect bidders reflecting the ongoing
appeal of safe-haven assets.	
    Tuesday's sale of $35 billion of two-year notes was also met
with solid demand.	
    Initial claims for state unemployment benefits dropped by
1,000 in the latest week to a seasonally adjusted 388,000, the
Labor Department said on Thursday. The prior week's figure was
revised up to 389,000 from the previously reported 386,000.
Economists polled by Reuters had forecast new claims falling to
375,000 last week.
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