* Market awaits U.S. payrolls report on Friday
* ADP private sector employment weaker than forecast
* ISM non-manufacturing employment component slips
By Luciana Lopez
NEW YORK, April 3 Prices for U.S. Treasuries
rose on Wednesday after tepid jobs and service sector data
dampened hopes for key labor market figures due on Friday.
Benchmark yields touched three-month lows after data from
payroll processor ADP showed U.S. private-sector employment rose
by 158,000 jobs in March, less than expected. The Institute for
Supply Management also reported that U.S. service sector growth
slowed in March to the lowest level in seven months.
"We are revising our forecast for March nonfarm payrolls
down 40,000 to 160,000," said Joseph LaVorgna, managing director
and chief U.S. economist at Deutsche Bank Securities.
Such views were "bullish for bonds, which are testing the
low end of their recent yield range," said Jake Lowery, Treasury
trader at ING in Atlanta, Georgia.
The benchmark 10-year Treasury note, down 3/32
of a point before these reports became available, rose 15/32 in
the New York afternoon, the yield easing to 1.812 percent.
"We see a 1.73 percent to 2.07 percent range for 10-year
yields; slightly longer term, it looks like 2.15 percent to 1.73
percent," said William O'Donnell, head of U.S. Treasury strategy
at RBS Securities in Stamford, Connecticut. "Near-term
resistance is around 1.83 percent."
Analysts in a Reuters poll forecast a rise in nonfarm
payrolls of 200,000 for March.
Now that expectations have been tempered by the ADP data, a
payrolls jump of 200,000 or more could prompt a drop in bond
But the magnitude of a retreat might be relatively modest
since bond investors had leaned toward being short, based on how
strong recent U.S. economic data had been, Lowery said.
"The magnitude of a setback could be less than what it would
have been had investors been positioned quite long."
But the medium- and long-term trend for the labor market
will also be important, said Steve Van Order, fixed income
strategist with Calvert Investments in Bethesda, Maryland.
If the unemployment rate edges down toward 7.4 percent
before the Fed's year-end expectations - "then the probability
of QE being tapered goes up in the market," he said.
The U.S. Federal Reserve is now buying $85 billion of
mortgage-backed securities and U.S. government debt per month.
Investors are trying to figure out when the Fed might pull back
on that aggressive easing.
Policymakers have said they want to see the unemployment
rate, currently at 7.7 percent, closer to 6.5 percent.
As part of its unconventional monetary easing, the Fed
bought $3.73 billion of Treasuries maturing between February
2019 and March 2020 on Wednesday.