July 5 (Bloomberg) -- Treasuries gained as central banks in the U.K., China and Europe took measures to sustain growth, adding to investor concern that the global economic recovery is faltering.
Ten-year note yields fell after European Central Bank President Mario Draghi said “downside risks to the euro-area economic outlook have materialized.” ECB policy makers lowered their main refinancing rate to a record low 0.75 percent. A report tomorrow is forecast to show the U.S. added 90,000 workers in June, the third month with fewer than 100,000 job gains.
“There’s still a great deal of pessimism about the strength of any recovery,” said Aaron Kohli, an interest-rate strategist in New York at BNP Paribas SA, one of 21 primary dealers that trade with the Federal Reserve. “Even if you get a fairly significant surprise, the market’s bias is to discount it. People still believe the malaise in the global economy is much greater than most policy makers realize.”
The 10-year yield fell four basis points, or 0.04 percentage point, to 1.59 percent at 10:18 a.m. in New York, according to Bloomberg Bond Trader prices. The yield earlier dropped to 1.58 percent, approaching the record 1.44 percent set June 1.
Thirty-year bond yields declined four basis points to 2.71 percent. Trading of Treasuries resumed today after being shut worldwide yesterday for the U.S. July 4 holiday.
The Fed plans to buy as much as $5.5 billion of U.S. government securities today as part of its effort to reduce long-term interest rates, and the U.S. is scheduled to announce the sizes of next week’s auctions.
The 30-year bond briefly erased gains after a private payrolls report showed companies added more workers than forecast in June. U.S. businesses added 176,000 positions last month, up from a revised 136,000 in May, higher than initially estimated, according to figures from Roseland, New Jersey-based ADP Employer Services. The median forecast of economists surveyed by Bloomberg called for a 100,000 advance.
Applications for jobless benefits decreased by 14,000 in the week ended June 30 to 374,000, the fewest since mid May, Labor Department figures showed today. Economists forecast 385,000 claims, according to the median estimate in a Bloomberg News survey.
The U.S. economy added 90,000 jobs in June, according to the median forecast of 80 economists in a Bloomberg News survey. The unemployment rate will remain at 8.2 percent, the median projection in a separate survey of 77 economists shows.
The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers about 90 percent of the economy, fell to 52.1 in June from the prior month’s 53.7, the Tempe, Arizona-based group said today. The median forecast of 70 economists surveyed by Bloomberg News projected 53. Readings above 50 signal expansion.
In a 45-minute span, the ECB and People’s Bank of China cut their benchmark borrowing costs, while the Bank of England raised the size of its asset-purchase program. They acted two weeks after the Fed expanded a program lengthening the maturity of bonds it holds and Chairman Ben S. Bernanke indicated more measures will be taken if needed.
“We’ve seen a bounce off comments from Draghi -- he’s reiterating what we all know, but he sounds quite bearish,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “It’s his comments saying the risks to the economic outlook are still on the downside. It’s nothing new.”
Treasuries yields are at levels making them near the most overpriced ever, according to a model created by Federal Reserve economists know as the term premium. The gauge was negative 0.90 today after falling to a record negative 0.94 on June 1. A negative reading indicates investors are willing to accept yields below what is considered fair value.