MW: Treasurys edge up as Fed worries eclipse euro zone
By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) — Treasury prices were slightly higher Wednesday after a strong jobs report once again put the Federal Reserve’s monetary policy front and center.
Automatic Data Processing said private-sector jobs rose by 188,000 in June, higher than the 160,000 expected by economists and 134,000 added in May. Weekly initial jobless claims fell 5,000 to 343,000 after economists polled by MarketWatch projected a 346,000 figure.
On that news, Treasurys gave back much of their morning price gains. Treasury yields, which move inversely to price, where down half a basis point to 2.473% on the 10-year note 10_YEAR -0.36% . The 30-year bond 30_YEAR +0.17% yield was up half a basis point at 3.483% while the 5-year note 5_YEAR -0.73% yield was down slightly at 1.375%.
The positive jobs figures come ahead of a Friday nonfarm payrolls and unemployment report, the most prominent indicator of the nation’s joblessness, which the Fed will use to help it decide when and how to scale back the pace of its bond-purchase program.
The positive ADP report is likely to bode well for meeting expectations on Friday’s numbers, according to Millan Mulraine, director of U.S. research and strategy at TD Securities.
“In payrolls terms, the 188,000 print on ADP is largely consistent with headline growth in the 165,000 to 175,000 region, which is largely in line with the current market consensus. Our own forecast is for a slightly more modest 161,000 increase,” he said in a note.
The central bank’s easy money policies have held yields artificially low, but rates have been rising over the last two months since the Fed indicated it may scale back its program later this year. That has the market on alert for economic data, particularly related to employment, that may influence the Fed’s decisions.
Treasury prices had been higher earlier Wednesday in a flight-to-safety bid as crisis in the euro zone once again flared. In Portugal, sovereign debt worries were revived in the wake of a resignation by the country’s finance minister and foreign minister.
The Portuguese 10-year bond yield BX:TMBMKPT-10Y +19.97% was up 1.42% Wednesday to 7.939%, after hitting an intraday high of 8.18%, its highest since November 2011, according to Tradeweb. European stocks were also hit hard and Greek 10-year yields were up 50 basis points at 11.677%.
Yields on the 10-year German bond BX:TMBMKDE-10Y -3.93% , or bund, benefited from a flight to safety bid, falling 5 basis points to 1.661%, according to Tradeweb.
Political tensions in Egypt, Turkey, Brazil, and Greece also prompted the safety bid.
