TREASURIES-Prices up as jump in new jobless claims feeds safety bid

Thu Apr 4, 2013 11:42am EDT

Related Topics

* New U.S. jobless claims rise to three-month high
    * Market awaits Friday's U.S. nonfarm payrolls report


    By Ellen Freilich
    NEW YORK, April 4 (Reuters) - U.S. Treasury debt prices rose
on Thursday, pushing yields to near 3-1/2-month lows, after a
jump in new jobless claims suggested key payrolls data due
Friday could show the labor market lost some steam in March, an
outcome that would favor safe-haven U.S. debt.
    The number of Americans filing new claims for unemployment
benefits rose 28,000 last week to a seasonally adjusted 385,000,
the highest level since last November, the U.S. Labor Department
said. It was the third straight week of gains in new jobless
claims. 
    The benchmark 10-year Treasury note, up 7/32 in
price before the jobless claims report, was up 12/32 immediately
afterward. Its yield stood at 1.77 percent, after dipping toward
a 3-1/2-month low. The 30-year Treasury bond rose
26/32 in price as its yield eased to 3.01 percent.
    Technical resistance and profit-taking before Friday's
nonfarm payrolls report subsequently trimmed some of those
gains.
    The U.S. Labor Department tied some of the volatility in
claims to holidays and spring vacations falling in March.
    Still, jitters about the second-quarter economic outlook
were enough to drive a safe-haven bid for Treasuries.
    "Every year now for three years, we have tended to see
Treasury yields rise in the early part of the year and then the
economic data seem to slow down as we get into the spring and
summer months," said Jim Kochan, chief fixed-income strategist,
Wells Fargo Funds Management LLC, Menomonee Falls, Wisconsin.
    Kochan also said weaker Institute for Supply Management
(ISM) indexes for March, particularly for manufacturing, "have
some people thinking about a slowing economy. That might not be
correct, but that's the sentiment now in the Treasury market."
    The buying in Treasuries has probably been "international
buying more than anything else," he added. "Though we won't have
the data for several weeks, typically, when you get these kinds
of moves, buying from overseas is a major factor."
    Whether some of that buying is inspired by the plan to tax
uninsured deposits in Cypriot banks as part of a euro zone
bailout for the country is "hard to tell," Kochan said. "But
certainly, if you were a large depositor in some of the banks in
peripheral European countries, you would have to ask yourself
whether you should diversify."
    
    PAYROLLS DATA AHEAD
    Below-forecast ADP private payrolls data for March, a
non-manufacturing employment component released on Wednesday,
had already lowered expectations for the payroll growth
investors expect to see in this Friday's employment report.
    The jump in new jobless claims reported on Thursday
reinforced those perceptions, allowing bond prices to rise and
yields to ease further.
    "The big show is (Friday's) employment report for March,"
said Chris Rupkey, managing director and chief financial
economist at Bank of Tokyo-Mitsubishi UFJ in New York.
    "Economic growth has had a soft patch around this time of
year for three straight years and there is evidence that the
economy will slow in the second quarter again this year as the
European economy is weak and the mandatory spending cuts from
Washington start to have a greater impact," he said.
    That could keep the Fed buying Treasury debt and nudge U.S.
government bond yields still lower, strategists said.
    As part of the Fed's ongoing program of unconventional
easing to stimulate lending and economic activity, the Federal
Reserve Bank of New York said its open market desk purchased
$1.575 billion in Treasury coupons with maturities ranging from
Feb. 15, 2036 to Feb. 15, 2043.
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