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TREASURIES-Long-dated bond yields edge higher ahead of jobs data
March 31, 2014 / 9:06 PM / 4 years ago

TREASURIES-Long-dated bond yields edge higher ahead of jobs data

* 30-year Treasury bond yields edge higher

* Short-dated notes stabilize on dovish Yellen comments

* Traders eye Friday jobs report (Adds new prices, analyst comment)

By Sam Forgione

NEW YORK, March 31 (Reuters) - Longer-dated U.S. Treasuries yields edged higher on Monday on expectations for an upbeat U.S. jobs report on Friday, while intermediate-dated notes stabilized after dovish remarks from Federal Reserve Chair Janet Yellen.

The potential for a stronger-than-expected employment report spurred some selling of 30-year Treasury bonds, which fell over 1 percentage point in price before trimming losses. Employers are expected to have added 195,000 jobs in March, according to the median estimate of economists polled by Reuters, up from 175,000 in February.

“A strong print could have a disproportionate impact on rates, at least as a knee-jerk reaction,” said Bulent Baygun, head of US interest rates strategy at BNP Paribas, in reference to a potential Treasury market selloff.

Baygun said that better U.S. jobs data would bolster Yellen’s remark at a press conference on March 19 that the Fed could start raising interest rates six months after the U.S. central bank ends its current monthly bond-buying program, which would be earlier than expected.

Traders said that recent strong U.S. economic data on consumer confidence, durable goods orders, and weekly jobless claims point to an improving U.S. economic picture after frigid temperatures hurt data at the start of the year.

The 30-year bond was last down 10/32 in price to yield 3.56 percent. The yield on the bond was at 3.54 percent last Friday.

The benchmark 10-year U.S. Treasury note was last down 2/32 in price to yield 2.72 percent. The yield on the note was at 2.71 percent late Friday.

The yield on the 10-year note fell 29 basis points for its first quarterly decline since the second quarter of 2012, according to Reuters data.

Benchmark Treasuries yields fell in the first quarter after capital outflows from emerging market assets and weak U.S. economic data at the start of the year spurred safe-haven bids, and after the Fed’s initial cuts to its bond-buying program in January failed to trigger a spike higher in interest rates.

Prices on 5-year U.S. Treasury notes rebounded from earlier losses, meanwhile, after Yellen gave a strong defense of the Fed’s easy-money policies in a speech to a community investment conference in Chicago.

In her first public speech since becoming Fed chair two months ago, Yellen said that the Fed’s “extraordinary” commitment to boosting the economy will be needed for some time to come.

“(Yellen) was unequivocally more dovish,” said Chris McReynolds, head of U.S. Treasury Trading at Barclays in New York.

The 5-year U.S. Treasury note was last up 2/32 in price to yield 1.72 percent. The yield on the note, which was at 1.74 percent late last Friday, fell after hitting its highest level since early January earlier in the day.

Data on Monday also showed the pace of business activity in the U.S. Midwest fell more than expected in March to its lowest level since August. The Institute for Supply Management-Chicago business barometer was 55.9, down from 59.8 in February. Economists’ median forecast in a Reuters poll was 59.0.

The data helped boost demand for intermediate-dated notes, said Chris McReynolds, head of U.S. Treasury Trading at Barclays in New York.

On Wall Street, all three major stock indexes rose following Yellen’s comments. The benchmark Standard & Poor’s 500 stock index was last up 0.79 percent. (Reporting by Sam Forgione; editing by Andrew Hay and Tom Brown)

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