MW: Treasury yields drop deeper into November levels
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices gained on Thursday, pushing yields further down to levels not seen since early November, as U.S. economic data and activity around the world causing uncertainty gave investors more reason to buy U.S. debt.
Yields on 10-year notes 10_YEAR -2.82% , which move inversely to prices, fell 3 basis points to 2.59%, touching the lowest level since November. A basis point is 1/100th of a percentage point.
Two-year yields 2_YEAR -9.01% slipped 1 basis point to 0.32%, near an all-time low.
Thirty-year yields 30_YEAR -2.08% declined another 5 basis points to 3.86% — levels not seen since October.
Treasurys held gains after a report showed 400,000 Americans made first-time claims for jobless benefits in the latest week.
The 400,000 level is seen as the maximum for a U.S. economy creating jobs instead of losing them, signalling a still-weak labor market. The report comes one day before the more closely followed monthly nonfarm payrolls report. See story on jobless claims.
Economists surveyed by MarketWatch estimate U.S. nonfarm payrolls added 75,000 jobs in July, which would be well below its normal pace.
A poor employment market keeping a lid on incomes, further federal spending cuts expected to rein in the deficit and households continuing to pay down debt and save more tend to point a positive picture for the demand for Treasury bonds, according to strategists at RBS Securities.
“All of this suggests to me that the bump along the bottom will continue and, with it, Treasury rates will stay in this lower range for some time to come,” they wrote in a note to clients.
The dollar was up strongly before the report after Japan intervened to push down the yen and traders wait to see whether the European Central Bank announces any more bond purchases or offers hints on the path of interest rates.
Japanese, European central banks
Treasurys also benefitted from activity around the world. The Bank of Japan intervened in currency markets to pressure the yen down, sending the dollar USDJPY +2.46% sharply higher. Read more on Bank of Japan’s yen intervention.
“Treasurys were slightly higher overnight following the Japanese currency intervention, but yield moves remain relatively contained ahead of Friday’s employment report,” said strategists at CRT Capital Group.
Also, European Central Bank President Jean-Claude Trichet said the bank would hold more liquidity operations to give euro-area banks more cash, sending long-term bond yields of Spain and Italy higher, signaling the European sovereign debt crisis could be sucking in Italy and Spain -- two much bigger economies and bond markets. Read more on European Central Bank, European bond yields.
