MW: Dollar gains against most rivals; yen is exception
ADP jobs report weak but expected
NEW YORK (MarketWatch) -- Treasurys declined Wednesday, pushing yields up from record lows that had deterred investors.
Ten-year note yields ) rose 6 basis points, or 0.06%, to 2.75%, reversing some of Tuesday's strong price gains that sent yields to their lowest ever.
Two-year note yields (UST2YR:
0.89, 0.00, -0.4%) rose 4 basis points to 0.94%, though still under the much-watched 1% level.
"Several investors have stopped buying Treasurys because the yields are 'just too low,'" Kevin Giddis, head of fixed income at Morgan Keegan, wrote in an email.
Losses were limited as news and data continue to indicate the economy -- already in recession -- may contract further.
The ADP national employment index said the U.S. private sector shed 250,000 jobs in November, the biggest job loss in seven years. The loss was in line with estimates of analysts surveyed by MarketWatch. See Economic Report.
The report comes two days before the government releases its report on the labor market for November, with analysts expecting the worst job losses in 25 years.
"Despite anticipation of a very negative non-farm payroll [report] on Friday, we would not be surprised to see some profit taking at these low yields in advance of that data," analysts at UBS Securities said.
Treasurys pared losses after the Institute for Supply Management said its non-manufacturing index fell to 37.3 in November, the lowest on record, from 44.4 in the previous month. Economists had anticipated a decline to 42.7. Readings below 50 indicate contraction in the industry.
The Federal Reserve's Beige Book, a collection of anecdotes about he economy, is due out at 2 p.m. Eastern Time.
Losing to agencies, banks
Ten-year yields have fallen in the last five trading sessions, even as other forms of debt supported by the government have proven an attractive alternative to Treasurys.
The Fed is expected to start buying debt sold by mortgage agencies Fannie Mae and Freddie Mac ) later this week, as well as mortgage-backed securities. Continuing new issuance of government-guaranteed bank debt has also drawn in investors.
Some analysts expressed concern over reports that U.S. Treasury Secretary Henry Paulson is debating whether to ask Congress for the second installment of the $700 billion bailout package, which could further prop up other forms of debt to the detriment of Treasurys.
On Monday, Federal Reserve Chairman Ben Bernanke added U.S. Treasurys to the list of assets the government may buy to prop up markets.
