Is good jobs number omen?

Treasuries fell for a second day after a private report showed U.S. companies added the most jobs in June since November 2012, boosting bets the economy is heating up enough for the Federal Reserve to consider raising interest rates.

Ten-year note yields rose to the highest in a week after ADP Research Institute’s hiring report topped the forecasts of all 47 economists in a Bloomberg survey. Treasury market volatility was at almost the lowest since May 2013 before tomorrow’s U.S. nonfarm payrolls report. Federal Reserve Chair Janet Yellen said in a speech there’s no need to change current monetary policy to address financial-stability concerns.

“It’s a good piece of data on the employment front, indicating stronger growth,” Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc., said of the ADP report. “Both the employment and inflation numbers are moving closer to the Fed’s goal.”

The benchmark 10-year yield rose four basis points, or 0.04 percentage point, to 2.61 percent at 11:13 a.m. New York time, according to Bloomberg Bond Trader data. It was the highest since June 24. The average yield for the past decade is 3.41 percent. The price of the 2.5 percent note due in May 2024 decreased 11/32, or $3.44 per $1,000 face value, to 99 2/32.

Bank of America Merrill Lynch’s MOVE Index, which measures price swings in Treasuries based on options, declined to 52.74 basis points on June 30, the lowest closing level since May 9, 2013. It was 53.25 today. The gauge has dropped from last year’s high of 117.89 basis points reached on July 5.

The Securities Industry and Financial Markets Association recommends a close to Treasury trading at 2 p.m. tomorrow and all day July 4 for the U.S. Independence Day holiday.

Jobs, orders

Yellen spoke to the International Monetary Fund in Washington.

“Monetary policy faces significant limitations as a tool to promote financial stability,” Yellen said. “Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach.”

Treasuries remained lower even after the Commerce Department reported U.S. factory orders fell more than forecast in May. They declined 0.5 percent, versus a 0.3 percent decrease estimated in a Bloomberg survey of economists.

Last month’s 281,000 increase in company hiring followed a 179,000 rise in May, data from the ADP Research Institute in Roseland, New Jersey, showed today. The median projection of 47 economists was 205,000, with a range of 169,000 to 250,000.

For tomorrow’s U.S. employment report, a Bloomberg survey projects employers added 215,000 jobs, compared with 217,000 in May. That would be the fifth month of an increase of more than 200,000 jobs.

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