BLBG:Treasuries Snap Gain Before Jobless Claims, Payrolls Data
Treasuries snapped a rally from yesterday on speculation government reports today and tomorrow will show the U.S. labor market is improving.
U.S. sovereign debt has alternated between gains and losses every day this week and last as traders debated whether a pickup in economic growth will last. David Kelly, chief market strategist at JPMorgan Funds, said investors should favor stocks over bonds. Federal Reserve Bank of Richmond President Jeffrey Lacker said financial markets had assigned too high a probability that the central bank would begin a new round of asset purchases, known as quantitative easing.
“I’m bearish” on Treasuries, said Yoshiyuki Suzuki, the Tokyo-based head of fixed income at Fukoku Mutual Life Insurance Co., which has the equivalent of $68 billion in assets. “It’s not necessary to do more quantitative easing.”
Ten-year notes yielded 2.23 percent at 6:56 a.m. in London, according to Bloomberg Bond Trader prices. The 2 percent note due in February 2022 changed hands at 97 31/32. While rates have risen from the record low of 1.67 percent on Sept. 23, they are less than the average of 3.86 percent for the past decade.
Suzuki said he would consider buying if the U.S. 10-year yield rises past 2.5 percent.
Japan’s 10-year rate declined 2 1/2 basis point to 0.995 percent. It has been in a range of 0.935 percent to 1.06 percent this year. A basis point is 0.01 percentage point.
Employment Data
Weekly initial jobless claims probably fell to 355,000 from 359,00, according to a Bloomberg News survey of economists before the Labor Department reports the data today. The estimated figure would be the least since April 2008. Payrolls in the U.S. probably increased by more than 200,000 workers in March for a fourth month, another Labor Department report will probably show tomorrow, based on the surveys.
The minutes of the Fed’s latest meeting showed policy makers see the improving economy reducing the need for new stimulus, even as they keep their plan to hold borrowing costs near zero at least through late 2014.
“While further easing is obviously something that’s conceivable, I wouldn’t favor it unless conditions deteriorated quite substantially,” Lacker, a voting member of the Federal Open Market Committee, said in an interview yesterday.
The global economy is slowing, JPMorgan Funds’ Kelly said yesterday on the “Bloomberg Surveillance” radio program with Ken Prewitt and Tom Keene. Kelly’s company is a unit of JPMorgan Chase & Co., the largest U.S. bank.
“We would still be cautiously overweight equities, underweight fixed income,” Kelly said. “There certainly is a slowdown in Europe, a mild recession. Over the next few years the U.S. economy ought to improve.”
European Debt Crisis
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.31 percentage points, rising from 1.95 points at the end of 2011. The past decade’s average is 2.14 percentage points.
Treasuries advanced yesterday as weaker-than-expected European bond auctions added to concern the region’s sovereign- debt crisis isn’t resolved.
“The problems in Europe aren’t over,” said Sean Murphy, a trader at Societe Generale in New York, one of the 21 primary dealers that trade with the Fed.
The U.S. is scheduled to announce today the sizes of three sales of coupon-bearing securities scheduled for next week.
The Treasury U.S. will probably sell $32 billion of 3-year notes, $21 billion of 10-year securities and $13 billion of 30- year bonds, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance.
U.K. Holiday
The auctions will take place over three days starting April 10. There will be $42.9 billion of Treasuries that are maturing and available for reinvestment, while the sales will raise $23.1 billion of new money, according to Wrightson. The U.S. sells this combination of securities every month.
Treasuries are scheduled to close tomorrow in Japan at 3 p.m. Tokyo time for Good Friday and stay shut in the U.K., based on recommendations from the New York-based Securities Industry and Financial Markets Association. Trading will resume tomorrow in the U.S., as the government issues the employment report, and shut at noon New York time.
Trading will stop at 3 p.m. Tokyo time on April 9 and stay shut in the U.K., resuming as usual in the U.S., according to the association.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
