March 7, 2014 / 2:31 PM / 4 years ago

TREASURIES-Yields highest in six weeks after solid jobs gains

* Yields rise to highest since Jan 23 as jobs gains solid
    * Safety bid seen holdings yields artificially low
    * Treasury to sell $64 bln coupon-bearing debt next week

    By Karen Brettell
    NEW YORK, March 7 (Reuters) - U.S. Treasuries yields rose to
their highest levels in six weeks on Friday after job growth
rose more than expected in February, which could ease fears of
an abrupt slowdown in economic growth and keep the Federal
Reserve on track in reducing its monetary stimulus.
    Employers added 175,000 jobs to their payrolls last month
after creating 129,000 new positions in January, the Labor
Department said on Friday. The unemployment rate, however, rose
to 6.7 percent from a five-year low of 6.6 percent.
 
    Benchmark 10-year notes dropped 18/32 in price with yields
 rising to 2.81 percent, the highest level since
January 23, up from 2.73 percent before the data was released.
Thirty-year bonds dropped 26/32 in price to yield
3.74 percent, up from 3.68 percent before the release.
    "It's a pretty solid print. The consensus in the bond market
has been for higher rates anyway so there is still a bearish
component out there," said Larry Milstein, head of agency and
government trading at R.W. Pressprich & Co in New York.
    Investors have been struggling to interpret a recent spate
of weakening data, which many see as having been influenced at
least in part by bad weather. 
    Friday's jobs figure gives some support to the Fed to
continue to reduce the size of its monthly bond purchases as
long as economic growth remains moderate.
    Friday's jump in yields was also seen reflecting reticence
by investors to buy the bonds at recent levels as many see rates
as having been held down by unrest in Turkey and Ukraine and not
fully reflecting the U.S. economic outlook.
    "Those lower yields were created by distress, once by the
Turkey situation at the beginning of February and once by the
Ukraine situation at the beginning of this month. Those are not
investor levels they are excess levels in the market. Now we are
moving back to fair value," said Tom Tucci, head of Treasuries
trading at CIBC in New York.
    Treasuries may also stay under pressure ahead of new supply
next week, when the government will sell $64 billion in new
coupon-bearing debt. This will include $30 billion in three-year
notes, $21 billion in 10-year notes and $13 billion in 30-year
bonds.

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