MW: Treasurys down before auction, data, Fed meeting
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices fell slightly early Monday, pushing 10-year yields to the highest in since October 2008, before the government sells $8 billion in inflation-indexed securities.
Traders will tune into results to see whether demand has grown as yields have increased significantly since the last round of poorly-received auctions.
Also, U.S. stock markets will have the first opportunity to respond to Friday's strong unemployment report. European markets remained closed for the holiday on Monday, as did some Asian markets.
Yields on 10-year notes (UST10Y 3.96, +0.03, +0.69%) , which move inversely to prices, rose 2 basis points to 3.95%. The yield touched 3.98%, the highest in 17 months.
Yields on 2-year notes (UST2YR 1.14, +0.05, +4.11%) increased 3 basis points to 1.14%. They earlier touched 1.17%, the highest level on a closing basis since August.
The ISM's services index and data on pending home sales are due at 10 a.m. Eastern time.
Another event on the radar is the Federal Reserve's Board of Governors meeting to discuss the discount rate. Read more on discount rate.
The meeting was announced on Friday, the same day that the Labor Department said the economy added the most jobs in three years, buoying hopes that the U.S. is on the mend. Read Friday's Bond Report.
Treasurys fell and the dollar gained after the report, but several analysts noted that not all was rosy: many of the jobs gained were temporary and wages fell, neither which tends to inspire consumer spending. Also, a broader measure of unemployment and the average length of unemployment increased, indicating that while companies have stopped mass firings or layoffs, it's harder for workers to find a new, permanent, full-time job, noted strategists at CRT Capital Group.
"The March jobs report underscores for us that job gains remain tepid, the quality of jobs out there is not great, and that while the worst is clearly behind us, the nonfarm payrolls report presented no warning side that yields, from a pure economic standpoint, need to be higher," they wrote in a note.
Auctions
The sale of Treasury Inflation Protected Securities, or TIPS, is the first of for major auction this week. Bids are due at 1 p.m. Eastern time.
"We are concerned about supply and the lack of set-up for the auctions as Friday was an abbreviated session and today we have most foreign participants off due to Easter Monday," said Thomas di Galoma, head of fixed-income rates trading at Guggenheim Partners.
That said, higher yields on the long-term debt sales later this week could attract buyers, he said.
That will be followed by a sale of $40 billion in 3-year notes (UST3YR 1.70, +0.04, +2.47%) on Tuesday and $21 billion in 10-year notes the next day.
The final sale will be of $13 billion in 30-year bonds (UST30Y 4.80, +0.01, +0.17%) on Thursday. The amounts are the same as in the most recent comparable sales.
