BLBG:Treasuries Set for Weekly Loss on Speculation U.S. Added Jobs Last Month
Treasuries headed for a weekly loss as economists said a government report today will show U.S. employers hired more than 200,000 workers for a third month, adding to signs the economy is gathering momentum.
Demand for the relative safety of U.S. debt was also damped as European stocks held yesterday’s rally after the Greek government said it reached its target in the biggest sovereign restructuring in history. Interest-rate swap spreads indicate increasing demand for yields higher than those on Treasuries.
“The firmer tone to so-called risk assets such as equities imparts a bit of an upside bias” to yields, said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “A lot clearly hangs on the U.S. payrolls data today. The key issues for Treasuries at the moment are sentiment in the equities market and domestic data.”
The U.S. 10-year yield was little changed at 2.02 percent at 10:13 a.m. London time, according to Bloomberg Bond Trader prices. The 2 percent note maturing in February 2022 traded at 99 27/32. The yield has risen four basis points, or 0.04 percentage point, this week, the most since the period ended Feb. 10.
The Stoxx Europe 600 Index of equities was little changed and the MSCI Asia Pacific Index climbed 1 percent.
Payrolls Report
Estimates for the number of U.S. workers hired in February range from 125,000 to 275,000, according to a Bloomberg survey of 94 economists. The median estimate is for a reading of 210,000. January’s gain of 243,000 was the most since April, when employers took on 251,000 workers. The Labor Department will report the data at 8:30 a.m. in Washington.
The difference between the two-year swap rate and the yield on U.S. debt of a similar maturity narrowed to as little as 24 basis points today, the lowest in almost seven months. U.S. government bonds have dropped 0.5 percent this year, while corporate debt gained 3.2 percent, according to Bank of America Merrill Lynch indexes.
Treasuries fell yesterday as Greece’s debt-swap deadline approached with a majority of investors signaling their readiness to forgive some of the nation’s borrowings, boosting risk appetite and damping demand for the refuge of U.S. bonds.
Greece today said it has a 95.7 percent participation rate among investors after it received approval to activate so-called collective action clauses.
Price Swings
U.S. 10-year notes yesterday yielded about 21 basis points more than same maturity German bunds, the most since November.
Bank of America Merrill Lynch’s MOVE index, which measures price swings based on options, rose to 76.6 yesterday after dropping to 75.1 the previous day. The measure has tumbled from 117.8 on Aug. 8 as central banks stepped up efforts to ease tension in financial markets.
The U.S. said it will sell $32 billion of three-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds next week. The auctions will take place over three days starting March 12.
The Federal Reserve plans to sell as much as $8.75 billion of U.S. debt due from August 2013 to January 2014 today, according to the New York Fed’s website.
The central bank is in the process of swapping $400 billion of shorter-maturity Treasuries in its holdings with longer-term bonds to cap borrowing costs.
The Fed’s Open Market Committee is scheduled to hold a policy meeting on March 13. The central bank said in January that it would keep the benchmark interest rate at almost zero through at least late 2014.
The Fed has held its target for overnight lending in a range of zero to 0.25 percent since December 2008. The MSCI All Country World Index (MXWD) of stocks reached the lowest level since 2003 on March 9, 2009, three years ago today. It has returned about 90 percent since then including reinvested dividends. Treasuries gained 15 percent in the period, the Bank of America indexes show.
Ten-year yields, which have been in a range of 1.79 percent to 2.09 percent this year, will advance to 2.53 percent by Dec. 31, according to the average estimate of economists in a Bloomberg News survey, with the most recent forecasts given the heaviest weightings.
To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
