MW: Treasurys gain after ADP says jobs unexpectedly cut
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices gained on Wednesday, pushing yields down, after ADP said private employers unexpectedly cut jobs last month, raising doubts over optimistic predictions for the Labor Department's payrolls report.
Yields on 10-year notes (UST10Y 3.82, -0.04, -0.91%) fell 3 basis points to 3.83%. Bond prices move inversely to their yields. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 1.02, -0.03, -3.04%) decreased 3 basis points to 1.04%.
ADP said private employers cut 23,000 jobs in March, worse than economists' expectations that companies added 40,000 positions. Read about ADP jobs.
The data comes two days before the government's jobs report, one of the most important economic-data points for financial markets. It's expected to show a rise in payrolls for March, even accounting for the bounceback from severe weather last month and for temporary hiring by the Census Bureau. See calendar of economic forecasts.
"Clearly ADP is disappointing to the growth-mongers and challenges the fear of a strong 'clean' report this Friday," said CRT Capital Group. "The market is making gains on this."
Also supporting bonds, it's the last day of the month, when benchmark bond indexes add any debt that was sold during the period, which usually extended the duration of the index.
Duration is a measure of price sensitivity to a change in interest rates, and is partly determined by maturity. Fund managers who try to match their holdings to benchmark indexes therefore tend to buy recently-issued debt at month end.
Technical thresholds
Still, potentially limiting gains, investors may decline buying before next week's auctions of notes and bonds. The bond market has grown accustomed to perpetually setting up for big slates of auctions every other week.
The Treasury Department will announce on Thursday how much in debt it will sell next week.
Wrightson ICAP predicts the government will sell $40 billion in 3-year notes (UST3YR 1.58, -0.04, -2.65%) , $21 billion in 10-year debt and $13 billion in 30-year bonds (UST30Y 4.72, -0.03, -0.53%) . It will also sell $8 billion in 10-year inflation-indexed debt, the firm said. All would be the same size as the last comparable sale.
"Once through next week's auctions, and with employment data in-hand, we should know a lot more about investor demand for Treasurys," said Bill O'Donnell, head of Treasury strategy at RBS Securities. "We'll either find new buyers at these range supports, or we won't."
Ten-year yields have support at 4% while 30-year bonds should see support at 4.90%, he wrote in a report.
"I still view the recent consolidation in long rates as a pause that refreshes on the road to modestly higher yields," O'Donnell said.
