Treasury yields almost at 9-month high before payrolls report

Treasury 10-year note yields traded close to nine-month highs before a government report tomorrow forecast to show the U.S. added the most jobs in five months.

The benchmark yield fluctuated after manufacturing in the U.S. expanded more than forecast in January even as claims for unemployment benefits unexpectedly increased last week. The Federal Reserve purchased $1.57 billion in securities as part of its stimulus program to boost the economy after policy makers said yesterday that the central bank plans to keep buying $85 billion of bonds a month.

“A 2% 10-year note is an equilibrium point given the current theme of active Fed, slow-growth scenario,” Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York, said in a telephone interview. “The direction from here will be a function of growth expectations, especially job-growth numbers, and tomorrow’s number will shed some light on what to expect.”

The benchmark 10-year yield fell one basis point to 1.98% at 3:33 p.m. New York time, according to Bloomberg Bond Trader prices. It touched 2.03% yesterday, the highest since April 25. The price of the 1.625% security due in November 2022 rose 2/32, or 31 cents per $1,000 face value, to 96 26/32.

Employers added 165,000 jobs in January after a gain of 155,000 last month, according to the median forecast in a Bloomberg survey, the most since August. Another survey projects the unemployment rate to remain at 7.8%.

Selloff Slows

Treasuries handed investors a 1.1% loss this month as of yesterday, set for the biggest decline since December 2010, according to Bank of America Merrill Lynch indexes. The MSCI All-Country World Index of shares gained 4.9% in the period including reinvested dividends.

The selloff slowed yesterday as the 10-year yield surpassed a technical level, with 2.03% above the so-called upper Bollinger band level of 1.99%, according to data compiled by Bloomberg.

Bollinger bands gauge volatility by plotting standard deviations above and below a moving average. Analysts use them to determine a probable range for a rate or security. Ten-year yields slid below the Bollinger level today.

The 10-year term premium, a model that includes expectations for interest rates, growth and inflation, was at the cheapest level since April. It touched minus 0.59%, the least expensive level since April 12, according to data compiled by Bloomberg. The measure dropped to a record minus 1.02% in July.

A negative reading indicates investors are willing to accept yields below what’s considered fair value.

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