Dismal private-sector jobs report deemed 'priced in'
Treasury prices fell Wednesday, pushing the yield on 10-year notes higher for a fifth consecutive session, as bond traders digested data that showed dramatic private-sector job losses last month as well as a Congressional Budget Office forecast of a much wider budget deficit in store for the federal government.
Specifically, the nonpartisan agency said the government will run a $1.2 trillion deficit for fiscal 2009. See budget story.
The bond market also awaited a Treasury Department auction of $30 billion in three-year notes, the government's second note auction of the week.
Ten-year note yields increased two basis points to 2.48%.
Two-year note yields also rose, up two basis points to 0.80%.
A basis point is the equivalent of 0.01%. Bonds' prices move inversely to their yields.
Treasurys remained lower after the ADP Employment Services report said private companies cut 693,000 jobs in December -- nearly 50% more than some economists had predicted. See ADP jobs story.
The report comes two days before the government's report on unemployment and nonfarm payrolls. Some analysts expect to show the jobless rate rose to 7.1% from November's 6.7%.
In a sign that job cutbacks may be far over, aluminum giant Alcoa said late Tuesday it will slash 13,500 jobs. See Alcoa story.
"Most of the data continues to point to a serious economic downturn domestically as well as overseas," said David Ader, U.S. government bond strategist at RBS Greenwich Capital.
"Much of the negative news was clearly priced in and ... unable to inspire enough apprehension about another leg down to offset the supply and general bias to shift from Treasurys to riskier assets," he said.
Also on traders' radar screens, the Treasury will accept bids on the three-year notes until 1 p.m. Eastern.
The Treasury began reissuing the maturity monthly in November, to help spread out debt supply expected to top $1 trillion this fiscal year as the government finances several programs designed to revive financial markets and spark economic growth.
In the final leg of this week's auction, the government will solicit bids for $16 billion in 10-year notes on Thursday.
Tuesday's sale of $8 billion in inflation-protected securities maturing in 10 years received very strong demand. Another $112 billion in short-term bill auctions are scheduled as well.
Also on tap, Treasury Secretary Henry Paulson will discuss the role of Fannie Mae and Freddie Mac in the housing market at noon Eastern, and Kansas City Federal Reserve President Thomas Hoenig will give his economic outlook at 1 p.m. Eastern.
