BLBG:Treasuries Head for Weekly Loss Before Jobs Report
Treasuries headed for their steepest weekly loss since the start of the year as U.S. stocks extended a record rally and economists said a report today will show the nation added jobs in February.
Benchmark 10-year rates rose past 2 percent for the first time in two weeks after data yesterday showed initial claims for jobless benefits in the U.S. unexpectedly dropped to a six-week low. ADP Research Institute reported March 6 that companies added more workers than projected in February. The Dow Jones Industrial Average of shares climbed to record in New York.
“Yields are rising globally this week,” said Hideo Shimomura, who helps oversee the equivalent of $63.2 billion in Tokyo as chief fund investor at Mitsubishi UFJ Asset Management Co., a unit of Japan’s largest publicly-traded bank. “There are high expectations for today’s jobs numbers. Sentiment is improving because the Dow is setting records,” curtailing demand for the haven of bonds, he said.
Benchmark 10-year Treasury yields advanced one basis point, or 0.01 percentage point, to 2 percent as of 7 a.m. in London, according to Bloomberg Bond Trader data. The 2 percent note due in February 2023 traded at a price of 99 31/32.
Yields have risen 16 basis points this week, the most since the period ended Jan. 4. They earlier touched 2.01 percent, the highest since Feb. 21. The Dow climbed to a record 14,354.69 yesterday.
Germany’s yield advanced to 1.49 percent yesterday from 1.41 percent on March 1.
Japan’s 10-year rate dropped 2 1/2 basis points to 0.65 percent today, after touching 0.585 percent on March 5, the lowest level since June 2003.
Comparative Returns
Treasuries have handed investors a 0.9 percent loss this year, while bonds in an index of sovereign securities around the world were little changed, according to Bank of America Merrill Lynch indexes.
The Dow returned 9.9 percent, according to data compiled by Bloomberg.
The U.S. probably added 165,000 jobs in February after a 157,000 gain in January, based on a Bloomberg News survey of economists before the Labor Department reports the figure at 8:30 a.m. in Washington. The jobless rate held at 7.9 percent, the survey showed.
China’s exports exceeded forecasts in February, a government report today showed, indicating that improving global demand may help to sustain the rebound in the world’s second- biggest economy. Imports fell.
Volatility Rises
Bank of America Merrill Lynch’s MOVE Index, a gauge of price swings in U.S. government securities, shows volatility is rising ahead of the employment report.
The index has climbed for three-straight days, the longest run this year. It rose to 60.5, in line with the average over the past six months.
Ten-year yields climbed to 2 percent in 2013 after holding below the level from May through December.
“Two percent is a critical level,” said Kim Youngsung, head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor with the equivalent of $103.7 billion in assets. “You may get buyers at that level.”
Mizuho Asset Management Co. in Tokyo, predicts yields will fall because inflation is in check, said Hiromasa Nakamura, a senior investor at the company.
Ten-year rates will be 1.2 percent by year-end, said Nakamura, who helps oversee the equivalent of $34.5 billion at the unit of Japan’s third-largest bank. “I’m still bullish,” he said.
Inflation Data
U.S. consumer prices rose 1.6 percent in January from the year before, the latest data from the Labor Department show.
The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, widened to 2.58 percentage points yesterday. It was the highest closing level since September.
Ten-year yields will decline to 1.86 percent by March 31 and then rise to 2.29 percent by year-end, according to a Bloomberg survey of economists, with the most recent projections given the heaviest weightings.
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
