By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices came under pressure on Wednesday, though still headed to solid gains for the month, after ADP said the U.S. private-sector added far fewer jobs than economists expected.
Yields on 10-year notes (UST10Y 2.97, +0.02, +0.68%) , which move inversely to prices, rose 1 basis point to 2.96%. It closed Tuesday at the lowest level since April 2009.
Yields on 2-year notes (UST2YR 0.63, +0.03, +5.15%) increased 2 basis points to 0.62%, after touching the lowest level on record on Tuesday. A basis point is 0.01%.
U.S. private-sector firms created 13,000 more jobs in June, according to the ADP employment report. Read more on ADP.
The data comes two days before the government more closely-watched nonfarm payrolls report. Economists surveyed by MarketWatch expect the Labor Department to say on Friday the economy lost 130,000 in June, including the loss of some 250,000 temporary workers at the Census Bureau.
Still, other regional manufacturing data and less demand for funding from European banks left stocks wavering between positive and negative territory. Along with the dollar declining against the euro, traders received mixed signals on investors' willingness to add riskier assets to portfolios at this point. Read more on the dollar, euro.
"We still believe that the thought of going short into payrolls and the long-weekend is not a compelling proposition," said George Goncalves, a bond strategist at Nomura Securities, referring to bets that Treasury prices would fall. "The bond market has been signaling for weeks that the situation in the risk markets was going to get tricky. Well, here we are."
Also somewhat supporting bonds were comments from Charles Evans, the president of the Chicago Federal Reserve Bank, according to CRT Capital Group.
Evans said inflation has recently moved down in a sharp, unusual, fashion and should be under 2% for the next three years. He is not optimistic about employment growth, he said on CNBC. See more on Fed's Evans.
European banks
Treasurys had been under some pressure before the U.S. data after European banks sought a smaller amount of European Central Bank loans than markets had anticipated, aiding U.S. stock futures and the euro versus the dollar. Read more on ECB loans.
Treasury yields staying near such significant lows also has many analysts questioning whether the market is signaling a very slow, drawn out recovery -- even if the economy doesn't quite a double-dip back into recession.
"Global financial market returns stand at the threshold of mediocrity," said Bill Gross, chief investment officer at Pimco, which manages $1.07 trillion in assets.
"With bonds priced not for recession but near depression, most major global bond indices now yield less than 3%, surely a forerunner of returns to come," he wrote in a commentary posted on the firm's Web site. "Stocks, long the volatile vamp of investor optimism, have not yet adjusted to the New Normal of half-size economic growth induced by deleveraging, reregulation, and deglobalization and have low single digit prospects as well." Read Bill Gross's commentary.
Month-end stats
Also, bonds tend to gain some support at the end of every month as investors who try to mirror holdings of benchmark indexes often buy bonds at that time. They seek to match the duration of their portfolios, which is partially determined by maturity, to new securities that have been issued and added to benchmark indexes during the month.
For June, Treasurys of all maturities have returned 1.8%, according to an index compiled by Bank of America Merrill Lynch.
Ten-year yields are down from 3.30% at the end of May, dropping for a third month and marking the biggest quarterly drop in yields since the period ending December 2008.
Yields on 2-year notes are also lower than last month, and have fallen this quarter by the most since late 2008 -- the depth of the financial market meltdown.
Thirty-year bond yields (UST30Y 3.94, +0.00, +0.08%) have fallen from 4.16% this month to 3.93%.
This year, Treasurys are up 5.8% so far, the best start to a year since 1995, according to Bank of America.
Corporate bonds have returned 1.9% in June, posting a slightly better year-to-date return of nearly 6%.
High-yield bonds have gained 1.3% this month, adding to a 4.75% return so far this year.
Municipal bonds, meanwhile, have slipped 0.15% in June. They've returned 3.2% year-to-date.
