By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices stayed higher Wednesday after a survey derived from ADP payrolls showed private employers added 209,000 jobs in March, close to what analysts expected.
Treasurys had been higher before the data following a weak Spanish debt auction and as investors in Asia and Europe reacted to the minutes from the Federal Reserve’s March policy meeting, released Tuesday.
Yields on 10-year notes 10_YEAR -2.73% , which move inversely to prices, fell 6 basis points to 2.24%. A basis point is one one-hundredth of a percentage point.
On Tuesday, yields jumped by the most since March 14, the day after the Fed’s meeting, when yields were rising during a 5-day selloff in Treasurys.
Thirty-year bond yields 30_YEAR -1.97% declined 6 basis points to 3.38%.
Yields on 5-year notes 5_YEAR -5.81% dropped 7 basis points to 1.04%.
Payroll-services provider ADP said private employers added 209,000 jobs in March. See more on ADP data.
The report comes two days before the Labor Department’s broader U.S. jobs estimate, which includes public-sector employment. Economists polled by MarketWatch expect that report to show nonfarm payrolls expanded by 200,000 in March, compared with 227,000 in February.
“This ADP report won’t really shift thoughts about nonfarm payrolls as, based on this, the current expectations for nonfarm payrolls are well anticipated,” said strategists at CRT Capital Group.
Also supporting bonds before the data were negative developments on Europe’s sovereign debt crisis. Spanish and Italian bond yields jumped after Spain saw borrowing costs rise and demand for its debt fall Wednesday, its first test of the credit markets since unveiling its latest austerity budget last week.
Bonds stayed up after European Central Bank President Mario Draghi said, at a Wednesday press conference, that inflation remains a risk to growth and that all off the bank’s non-standard measures, including the liquidity operations credited with stabilizing the banking system, are temporary. See story on ECB, Draghi.
Coming up is the Institute for Supply Management’s U.S. nonmanufacturing index for March, due at 10 a.m. Eastern time.
Rethinking Fed minutes
On Tuesday, Treasury prices turned down sharply after the Federal Open Market Committee’s minutes indicated that there was less interest in another round of asset purchases, known as quantitative easing, and that only a couple of members suggested that additional easing could become necessary if the economy failed to maintain momentum. See story on Fed minutes.
“I was frankly stunned by the Treasury market’s out-sized reaction to what we read as a relatively innocuous FOMC minutes release,” said Bill O’Donnell, head of Treasury strategy at RBS Securities. “We hacked the thing to death and saw nothing that changed any of our views.”
He said he never expected any extensive discussion of another round of quantitative easing in March. The next FOMC meeting is in April, but “all year we’ve collectively assumed that the 2-day Fed meeting in June was the key meeting for the Fed,” he wrote in a research note.
The Fed’s current bond-purchase program, Operation Twist, ends in June.
“Our odds of QE3 has been, and will continue to be, ~60% in 2012,” O’Donnell said.
The Fed is actually conducting two buybacks during Wednesday’s session, due to the shortened trading session on Friday for Good Friday.
