March 6, 2013 / 8:47 PM / 6 years ago

TREASURIES-Prices fall on private jobs data ahead of debt supply

* U.S. private sector adds 198,000 jobs in February
    * 10-year yields at highest in more than a week
    * U.S. non-farm payroll data due on Friday

    By Chris Reese
    NEW YORK, March 6 (Reuters) - U.S. Treasuries prices fell
for a third consecutive session on Wednesday as
better-than-expected jobs data undermined the safe-haven allure
of U.S. government debt, and as investors set up for new debt
supply next week.
    Losses were limited, however, by expectations the Federal
Reserve will continue buying debt through the year in an effort
to prop up the economy, while a drop in new orders for factory
goods underscored the still-modest pace of recovery in the
world's largest economy.
    Treasuries have slid recently as investors, expecting low
interest rates for years to come, have sought returns in riskier
assets such as stocks, boosting the Dow Jones Industrial Average
 on Tuesday to an all-time high. That index rose again on
Wednesday, surpassing the previous session's record. 
    A report by payrolls processor ADP showed U.S. private
employers added 198,000 jobs in February, which was more than
expected and taken by investors as another sign of improvement
in the labor market. 
    The report bolstered some expectations the government could
report relatively solid jobs growth in February non-farm
payrolls data, due on Friday. Friday's number is particularly
important because Federal Reserve policy makers want the U.S.
jobless rate to fall from its current 7.9 percent level closer
to 6.5 percent. 
    "Ever since the Fed has tied its guidance on interest rates
and quantitative easing to labor market data, that has been
where the market has been focused as well," said Jake Lowery,
Treasury trader at ING Investment Management in Atlanta. "We had
ADP employment data today, which surprised to the upside, and
that helped take (Treasuries) rates higher."
    Anticipation of next week's Treasuries supply also tugged at
prices, Lowery said. The U.S. Treasury is set to auction
three-year and 10-year notes next week, along with 30-year
    "It seems that with Treasuries trading in a pretty tight
range lately, more and more market participants are focusing on
small opportunities around the supply calendar each month, and
some people are trying to set up for that supply even before
payrolls," he said.
    Benchmark 10-year Treasury notes traded 12/32
lower in price to yield 1.94 percent, the highest in over a week
and up from 1.90 percent late Tuesday. Thirty-year bonds
 traded 27/32 lower to yield 3.15 percent from 3.11
    In addition to the private employment data on Wednesday,
data also showed new orders for U.S. factory goods fell in
January as demand for transportation equipment weakened, but the
underlying strength in manufacturing remained intact.
    Stephen Stanley, chief economist with Pierpont Securities in
Stamford, Connecticut, said that what Fed Chairman Ben Bernanke
and vice-chair Janet Yellen have said recently about asset
purchases, "have pushed the timetable out."
    Stanley said he expects the U.S. central bank's
unconventional monetary policy, known as quantitative easing, to
end early next year.
    The Fed's support has helped fuel the recent stock rally,
with the central bank buying $85 billion per month of
mortgage-backed securities and Treasuries in an open-ended
program that is generally expected to last through 2013.
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