Auction of Treasury Inflation Protected Securities coming up
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices pared gains Thursday, leaving yields down from recent highs, after a report showed U.S. jobless claims declined a little more in the latest week than analysts predicted.
Bonds were higher before the report as economic data around the world called into question the recent optimism about the global growth outlook and shift out of U.S. debt.
Yields on 10-year notes 10_YEAR -0.48% , which move inversely to prices, declined 1 basis point to 2.29%, after slipping to 2.25% earlier. A basis point is one one-hundredth of a percentage point.
The benchmark securities recently touched their highest yield level since late October after a run from 2% two weeks ago.
Yields on 5-year notes 5_YEAR -1.23% fell 2 basis points to 1.13%, after earlier this week reaching their highest level since early August.
Thirty-year bond yields 30_YEAR -0.06% were little changed at 3.38%, after having touched their highest level since September earlier this week.
Treasury prices gave up some ground after the Labor Department said first-time filings for unemployment benefits fell by 5,000 to a seasonally adjusted 348,000, the lowest level since February 2008. Read about jobless claims.
“The four-week average remains well below the 400,000 mark, suggesting that the jobs market remains on a decent footing,” said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.
Treasury gains began during the Asian session, when a March survey showed Chinese factory activity is slowing sharply. Read about China’s manufacturing.
Weaker-than-expected purchasing managers’ index readings in Europe fed into fears the region slipped into and remains in recession. See story on Europe’s PMIs.
“One-off data is one thing, but the consistency of this across the globe surely makes one pause in the confidence that the prior couple of months may have instilled,” said bond strategists at CRT Capital Group.
However, analysts don’t think the data will necessarily cause a sharp flight to safety, just push yields back towards what they now consider the bottom of a higher range after the latest selloff. Ten-year yields are seen trading between 2.40% and 2.10%.
“There is some immediate resistance at 2.25% that we need to get through. After that, I expect 10-years to rotate all the way back to 2.10% (at least), which is the top of the former range and the mid-point of the broader range that we’ve been in since early August of last year,” said Bill O’Donnell and John Briggs, bond strategists at RBS Securities.
Treasury bonds are considered good to hold during periods of economic weakness, because the steady coupon helps boost returns while other assets, including equities, may decline.
Still to come is the Treasury Department’s auction of inflation-indexed 10-year securities and Federal Reserve Chairman Ben Bernanke’s second of four university lectures on the central bank.
