BS: Treasuries Little Changed as U.S. Employers Cut Jobs in June
By Cordell Eddings and Susanne Walker
July 2 (Bloomberg) -- Treasuries were little changed as the U.S. payrolls report showed employers cut jobs in June, adding to concern the economy is falling back into recession.
The two-year note’s yield was within five basis points of its all-time low as private employers added fewer positions than economists forecast. The extra yield investors demand to hold 10-year notes over the shorter maturity fell for a fifth day in the longest stretch of decreases since May on heightened deflation concern.
“We have reached an area where we have priced in a lot of the bad news,” said David Ader, head of government bond strategy in Stamford, Connecticut, at CRT Capital Group LLC.
The yield on the 10-year note dropped less than one basis point, or 0.01 percentage point, to 2.95 percent at 9:12 a.m. in New York, according to BGCantor Market Data. The price of the 3.5 percent security maturing in May 2020 rose 1/32, or 31 cents per $1,000 face amount, to 104 22/32.
“The possibilities of a double dip are in the minds of a lot of people in the market,” Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut, said before the report.
Fed Rate View
Futures on the CME Group Inc. exchange showed a 17 percent chance of the Federal Reserve raising its target lending rate for overnight lending between banks by at least a quarter- percentage point by the December meeting, compared with 36 percent odds a month ago.
The narrowing spread indicates investor preference for longer-term bonds, which tend to rise on slowing inflation. Two- year rates tend to track the outlook for the Fed’s target rate for overnight lending.
Treasuries rallied on June 4, when the Labor Department reported employers added fewer jobs in May than economists forecast. U.S. debt fell on May 7 as April payrolls increased the most in four years.
Bond Forecasts
Treasuries returned 5.9 percent in the first six months of 2010, Bank of America Merrill Lynch indexes show. The MSCI Index plunged 11 percent in the same period.
Ten-year notes fell earlier on speculation yields at almost the lowest level in 14 months aren’t justified given forecasts the U.S. economy will keep expanding.
“Yields must rise,” said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Corp. “The economic expansion will continue.”
U.S. economic growth will slow to 2.9 percent in 2011 from 3.2 percent this year, a Bloomberg survey of analysts shows.
--Editors: Dennis Fitzgerald, Dave Liedtka
To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
