TREASURIES-Prices steady to lower on private jobs data

Thu Jan 3, 2013 9:30am EST

Related Topics

* ADP Dec private employment rises by more than expected
    * Price losses limited by worries over coming political
battle
    * Fed buying longer-dated Treasuries

    By Chris Reese
    NEW YORK, Jan 3 (Reuters) - U.S. Treasury debt prices were
steady to slightly lower on Thursday after data showing the
private sector added more jobs than expected in December, which
undermined the safe-haven appeal of U.S. government debt.
    Yields briefly touched the three-month highs reached on
Wednesday, when bonds sold off sharply following a U.S.
government deal to avoid sharp tax hikes under the so-called
"fiscal cliff."
    Thursday's losses were limited, however, with few investors
willing to abandon lower-risk Treasury debt holdings as U.S.
political battles loom in coming weeks over spending cuts and
raising the nation's debt ceiling.
    Still, ahead of Friday's key payrolls data from the
government, investors were focused on the ADP Employment Report,
which showed private-sector employers added 215,000 jobs in
December. Economists surveyed by Reuters had been looking for a
gain of 133,000 jobs. 
    "There's an undeniable improving trend in the employment
figures showing through in ADP and we've been seeing that in the
non-farm private payrolls as well. That's in keeping with the
overall picture of stable to improving growth that we saw as
2012 wound down," said Robert Tipp, chief investment strategist
at Prudential Fixed Income in Newark, New Jersey.
    Good news for the economy is bad news for bonds, and
benchmark 10-year Treasury notes traded 1/32 lower
in price with their yield little changed from late Wednesday at
1.84 percent.
    Benchmark yields rose to 1.86 percent directly after the
release of the ADP data, matching the three-month high touched
on Wednesday on news the government had reached a last-minute
agreement to avert the "fiscal cliff."
    President Barack Obama and congressional Republicans face
two more months of tough talks on spending cuts and an increase
in the nation's debt limit as the hard-fought deal to avert the
so called "fiscal cliff" covered only taxes and delayed
decisions on expenditure until March 1. 
    Yields may rise further if data, including the closely
watched jobs report for December due out on Friday, show the
U.S. economy is improving.
    In the limited selling, one big buyer was scheduled in
longer-dated debt. The Federal Reserve on Thursday will buy
$4.25 billion to $5.25 billion of Treasuries maturing January
2017 through September 2017 in its first stimulus operation of
the year.
    The central bank's "Operation Twist" stimulus program, under
which it was selling shorter-dated Treasuries and buying
longer-dated debt, expired at the end of December. The Fed is
now buying about $40 billion per month of mortgage-backed
securities and $45 billion per month of longer-dated Treasuries
in an effort to prop up the economy.
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