By Ben Eisen, MarketWatch
NEW YORK (MarketWatch) — Treasury prices fell on Wednesday after a stronger-than-expected report on Chicago-area business activity.
The Chicago purchasing managers’ index fell to 63 in November after climbing to its highest level since early 2011 in the previous month. Nonetheless, the reading beat the expectations of economists polled by MarketWatch, who predicted a reading of 59.
Treasurys moved lower on the strong data. The benchmark 10-year note 10_YEAR +1.07% yield, which rises as prices fall, rose 2.5 basis points on the day to 2.718%. The 30-year bond 30_YEAR +0.32% yield rose a basis point to 3.812% and the 5-year note 5_YEAR +3.65% yield rose 1.5 basis points to 1.362%.
In other economic data, the number of people applying for unemployment benefits dropped by 10,000 to 316,000, beating the expectations of MarketWatch-polled economists, who predicted a rise to 330,000. The monthly average of claims also fell to 331,750.
Durable-goods orders, a measure of business investment, dropped by 2% in October, mainly due to declines in orders of jumbo jets. Though economists had expected a larger 2.2% drop, the data could indicate slower economic growth in the months ahead.
“Either you can write off the report due to the impact of the government shutdown or believe business spending remains very lackluster with CEOs not interested in ramping up the business investment cycle that has been absent during the current recovery,” said Adrian Miller, director of fixed-income strategy at GMP Securities LLC, in a note. He added that he believes the later to be true.
The Treasury Department will complete its final auction in a trio of sales this week when it offers $29 billion of 7-year notes 7_YEAR +1.37% at 11:30 a.m. Eastern. Yields have moved higher in recent weeks, making the 7-year notes relatively cheap as buyers look to pick up securities going into the end of the month, according to Stanley Sun, strategist at Nomura Securities.
The market is looking for signs of when the Federal Reserve will scale back its $85 billion in monthly bond buying. Many market participants expect that if a payrolls report due at the beginning of December shows an improving labor market, the central bank could slow its pace of purchases before the end of the year. Those fears may cut into demand for the auction.
“We are expecting larger concessions for the 7-year pre-auction as investors may be bracing for the risk of an earlier-than-expected Fed tapering in December,” Sun said in a note.
Ben Eisen is a MarketWatch reporter based in New York.
