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发帖数: 29846 | 1 Treasury Prices Rally on Jobs Report
By MIN ZENG
A disappointing U.S. jobs report generated a broad price rally in the U.S.
Treasury bond market, pushing down benchmark 10-year note's yield from the
highest levels in more than two years.
In midday trade, the benchmark 10-year Treasury note broke a three-day
losing streak and rose by 18/32 in price. The yield fell to 2.912%,
according to Tradeweb. Bond prices rise when their yields fall.
Speculation that Friday's data would show stronger jobs growth had sent bond
prices lower in earlier global trade. The 10-year yield briefly crossed the
3% mark for the first time since July 2011.
But buyers flocked back as the world's largest economy added 169,000 new
jobs in August, lower than 175,000 forecast by economists and casting some
doubt over the pace of growth in the labor market. The July job growth was
revised lower to 104,000 from 162,000 previously reported.
The U.S. unemployment rate dropped 0.1 percentage point to 7.3% in August
but that reflected a shrinking overall labor force. The labor force
participation rate, which is the percent of the population either working or
looking to work, fell to 63.2%, the lowest level since 1978.
Friday's report, a key gauge of the labor market, is an important driver of
whether the Fed will announce at its policy meeting this month that it is
reducing the pace of bond purchases, currently $85 billion monthly. Fed
Chairman Ben Bernanke has signaled that the central bank could start cutting
back this year if the economy continues to strengthen.
"I think this report is a catalyst to create a shift in sentiment in bonds,"
said James DeMasi, chief fixed-income strategist at Stifel Nicolaus & Co.
in Baltimore. "There is no fundamental justification for the Federal Reserve
to taper bond buying in September."
Anxiety over a shift in the Fed's easy-monetary stimulus has been the key
driver sending bond prices falling and pushing yields sharply higher over
the past few months.
The 10-year yield has jumped from this year's low of 1.61% on May 1. Earlier
Friday before the jobs data, it hit 3.007%, reflecting rising bets among
traders and investors wagering bond prices would fall further.
The jobs data caused such negative bets on bonds to pull back. In doing so,
market participants bought Treasury bonds, sending the 10-year yield down to
as low as 2.858%.
"The Treasury market got ahead of itself, and it correcting to lower yields,
" said Kevin Giddis, head of fixed income at Raymond James in Memphis, Tenn.
The jobs report contrasted with some more upbeat economic releases in recent
weeks. Thursday, a gauge of the service sector rose to the highest level
since 2008, and a gauge on the nation's manufacturing also hit a multiyear
high earlier this week.
The mixed data raised some question over whether the U.S. economy could pick
up momentum during the second half of the year. Fed officials have
emphasized that labor-market developments are key factors in their
deliberations over interest-rate policy outlook, so at the very least Friday
's jobs report injected some uncertainty over whether the Fed would cut bond
buying this month, traders said.
"Many people thought the Fed would taper bond buying this month. Now this is
not a done deal," said Jason Rogan, managing director of U.S. government
bond trading in New York at Guggenheim Securities LLC.
Michael Franzese, senior vice president of fixed-income trading at ED&F Man
Capital Markets in New York, said the Fed could make a "token" cut and
strengthen its language to signal to investors that the central bank will
keep short-term interest rates lower for longer.
The Fed has held its policy rate between zero and 0.25% since 2008.
Mr. Franzese predicts the sharp rise in yields provides a buying opportunity
. He bets the 10-year yield will fall and settle into 2.625%-2.75% by the
end of this year.
Some other traders beg to differ. They believe bond yields will rise in the
longer term, just that the magnitude and speed will be much smaller compared
with what happened during the bond market's spring swoon.
Despite Friday's decline, the 10-year yield was higher than 2.769% from the
end of last week.
In the short term, new debt supply could pressure the bond market. The
Treasury Department is scheduled to sell $65 billion next week, including $
21 billion in 10-year notes and $13 billion in 30-year bonds. |
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