Treasuries drop for 2nd day as U.S. jobs growth exceeds forecast

Treasuries fell for a second day as a report showed the U.S. economy added more jobs than forecast last month, adding to speculation that stimulus from the Federal Reserve is bolstering economic growth.

The yield on the 10-year note rose as a report showed the U.S. added 171,000 jobs in October, compared with a forecast of 125,000 and a revised 148,000 gain the previous month. The benchmark security broke a three-day rally yesterday as employment and manufacturing data showed signs of strength.

“The rise in yield is showing people are slightly more optimistic about the health of the economy,” said Ira Jersey, an interest-rate strategist at Credit Suisse Group AG in New York one of 21 primary dealers that trade with the central bank.

The yield on 10-year notes rose four basis points, or 0.04 percentage point, to 1.77 percent at 8:45 a.m. New York time. The 1.625 percent note due in August 2022 fell 11/32, or $3.44 per $1,000 face amount, to 98 3/4.

Thirty-year bond yields rose five basis points to 2.95 percent.

Jobs Data

“We’ll still bounce around and have some volatility,” said Steven Ricchiuto, said chief economist at Mizuho Securities USA Inc. in New York. “The next big thing for the bond market is the elections.”

The unemployment rate rose to 7.9 percent in October, after dropping to 7.8 percent the previous month, the lowest since January 2009, as employers took on more part-time workers. It was forecast to rise to 7.9 percent, according to the median estimate of 88 economists surveyed by Bloomberg.

The payrolls data comes four days before the U.S. presidential election. Employment and the economy are central themes in the campaign, with President Barack Obama and former Massachusetts Gov. Romney each trying to convince voters they can best energize the expansion and create jobs. The jobless rate had stayed above 8 percent since February 2009.

Bond investors are better off during the Obama administration now than four years ago, Bank of America Merrill Lynch bond index data show.

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