February 1, 2013 / 2:10 PM / 5 years ago

TREASURIES-Prices rise as unemployment rate slightly higher

* U.S. jobs grew modestly in January, prior months revised
higher
    * Yields for 10-year Treasuries find traction difficult at 2
percent
    * Unemployment rate edges higher to 7.9 percent

    By Luciana Lopez
    NEW YORK, Feb 1 (Reuters) - Prices for U.S. Treasuries edged
up in choppy trading on Friday as data suggested the U.S. labor
market was healing, albeit at a subdued pace and with
unemployment still higher than policymakers would like.
    U.S. payrolls grew modestly in January and gains in the
prior two months were bigger than initially reported, supporting
views the economy's sluggish recovery was on track despite a
surprise contraction in output in the final three months of
2012. 
    "The upward revisions make this a firm report, but this
month isn't that impressive with a dip in the work week, steady
YoY earnings and the uptick in unemployment, which is of course
what the Fed is focusing on," said David Ader, head of
government bond strategy at CRT Capital Group in Stamford,
Connecticut.
    The Federal Reserve wants to see unemployment at 6.5
percent, with some analysts saying policy is effectively on hold
until that level is reached. The Friday data showed that the 
unemployment rate edged up 0.1 percentage point to 7.9 percent.
    That gain does not come from more people entering the job
market, Ader said, "so no signal of improving job confidence."
    While there are elements of the report to please both bulls
and bears, said Rob Carnell, an economist with ING Bank, "for
now, however, this is further vindication of the Fed's December
QE expansion," and should help limit the testing of 10-year
yields seen over recent weeks.
    Treasuries pared losses sharply on the data, with prices for
10- and 30-year debt jumping into positive territory, although
still seesawing back and forth into losses.
    The 10-year Treasury note last traded up 5/32 in
price to yield 1.969 percent, despite having yielded above 2
percent earlier in the session.
    The 10-year notes have been testing the 2 percent level all
week but have found traction difficult at that level. If the
yield closes above 2.01 percent, a 61.8 percent retracement of
the yield's fall from 2.40 to 1.38 percent in March-July last
year, that could lead to a test of resistance from its channel
top around 2.08 percent, George Davis, chief technical analyst
at RBC Dominion Securities, said in report. 
    The 30-year bond last traded up 1/32 in price to
yield 3.167 percent, from 3.171 percent late on Thursday.

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