TREASURIES-Yields up on payrolls positioning, no ECB easing hint

Thu Feb 6, 2014 9:48am EST

Related Topics

* Yields rise with German bunds as Draghi upbeat on eurozone
    * Traders positions for moderate jobs gains in Friday's
payrolls report
    * Fed to buy $1 bln-$1.25 bln bonds due 2036-2043

    By Karen Brettell
    NEW YORK, Feb 6 (Reuters) - U.S. Treasuries yields edged up
on Thursday in choppy trading after European Central Bank
President Mario Draghi gave no hint of imminent monetary policy
easing in initial remarks after holding rates steady, and as
investors positioned for Friday's highly anticipated jobs report
for January.
    The ECB left interest rates unchanged on Thursday, as was
expected by economists, holding off fresh policy action to
combat the threat of deflation while it waits for new staff
forecasts next month. 
    Treasuries followed German government bonds, which had bouts
of selling on Draghi's cautiously upbeat comments on the
economy, though the ECB President's comments were not seen as
departing from his previous position.
    "So far he's stayed in line with previous comments, he
expects a period of low inflation, he is ready to act if need
be, and he sees the recovery as moderate," said Jason Rogan,
managing director in Treasuries trading at Guggenheim Partners
in New York.
    At the same time investors were cautious heading into
Friday's jobs report, which economists expect to show solid jobs
gains despite a recent bout of worsening economic data and a
surprisingly weak jobs report in December.
    Employers are expected to have added 185,000 jobs in the
month, according to the median estimate of 101 economists polled
by Reuters. Some traders are anticipating a slightly lower
number of jobs additions, of around 160,000 - 170,000.
    The number of Americans filing new claims for unemployment
benefits fell more than expected last week, in a boost to the
labor market outlook and the broader economy, data showed on
Thursday.
    Other data showed a weakening in exports in December, which
if it extends to January could see trade being a drag on growth
in the first quarter after it helped to buoy the economy in the
last three months of 2013. 
    Benchmark 10-year Treasuries yields were last
down 6/32 in price to yield 2.69 percent. The yields have
dropped from more than 3 percent at the beginning of the year
and traded as low as 2.57 percent on Monday, the lowest since
Nov. 1.
    Treasuries yields have been pulled down in the past month as
weakening data raises concerns over the strength of the economic
recovery while fears over emerging market economies have led
investors to flee their assets and buy safe haven U.S.
government bonds.
    But traders expect yields could rise again if jobs and other
data rebounds from their recent weakness, keeping the Federal
Reserve on track to reduce the size of its monthly bond
purchases, and if volatility in emerging markets ebbs.
    The Fed last week cut its monthly bond purchases by $10
billion, to $65 billion and is expected to continue reducing the
size in $10 billion increments.
    "You're going to continue to see a battle between the EM
flight-to-quality concerns and the fact that the Fed, which has
been the biggest buyer of treasuries and mortgages in the
worlds, are slowly but surely reducing what they are buying,"
said Rogan.
    The Fed will buy between $1.00 billion and $1.25 billion in
bonds due 2036 to 2043 on Thursday as part of its ongoing
purchases.
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