TREASURIES-Yields fall to three-week lows, extending jobs disappointment

Mon Jan 13, 2014 9:57am EST

Related Topics

* Yields fall to three-week lows after weak jobs report
    * Short and intermediate-debt most volatile on rate
speculation
    * Fed to buy $1 bln-$1.25 bln TIPS due 2018-2043

    By Karen Brettell
    NEW YORK, Jan 13 (Reuters) - U.S. Treasuries prices edged up
on Monday, extending Friday's rally after employers added far
fewer jobs in December than traders and economists had expected,
with yields falling to three-week lows.
    Benchmark 10-year note yields registered their largest
one-day fall since October on Friday on news U.S. employers
added only 74,000 workers in December, far short of the 196,000
rise forecast by analysts polled by Reuters. 
    The Merrill Lynch MOVE index, which estimates
future volatility of long-term bond yields, plunged on Friday to
its lowest level in two months after the jobs data. The index
dropped to 61.2 Friday, down from 73.7 the previous day.
    Three- and five-year notes, which have been the worst
performers since the Federal Reserve said in December it would
reduce the size of its bond purchase program, were among the
best bid after Friday's weak jobs data.
    The lower-than-expected jobs gain is not yet seen as likely
to alter the Fed from its course of reducing bond purchases,
which were cut in December by $10 billion to $75 billion-a-month
and are seen as likely to be further pared over coming months.
    But speculation over when the Fed is likely to begin raising
rates from rock-bottom levels is likely to keep short- and
intermediate-dated debt volatile, with expectations over when a
rate hike could begin varying from mid-2015 to 2016.
    "I think that's really where the volatility is going to be
as far as those forward rate expectations are. We had some
liquidation since the Fed meeting in the front-end of the market
and I think some of that is slowly creeping back in as people
realize the Fed's nowhere near removing that type of
accommodation," said Tom Tucci, head of Treasuries trading at
CIBC in New York.
    Five-year notes were last up 3/32 in price to
yield 1.600 percent, down from a high of 1.755 percent on Friday
before the jobs data.
    Benchmark 10-year notes rose 2/32 in price to
yield 2.847 percent, down from a high of 2.967 percent on
Friday. Thirty-year bonds increased 2/32 in price to
yield 3.795 percent, down from Friday's high of 3.891 percent.
    The economic calendar was light on Monday with the next
major release being retail sales data for December on Tuesday,
which may have been negatively impacted by weather.
    Atlanta Fed President Dennis Lockhart is also due to speak
later on Monday. The Fed will buy between $1 billion and $1.25
billion in Treasury Inflation-Protected Securities (TIPS) due
between 2018 and 2043 on Monday as part of its ongoing purchase
program.
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