MW: U.S. bond yields hit new lows after weak payrolls
Data give Fed cover to buy more bonds, CRT says
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices jumped on Friday, pushing yields on major benchmark indexes down sharply to record lows after a report showed U.S. payrolls rose 69,000 in May, far fewer than analysts expected.
Yields on 10-year notes 10_YEAR -6.85% , which move inversely to prices, fell 10 basis points to 1.46% — setting a new low and from 1.53% prior to the report.
A basis point is one one-hundredth of a percentage point.
Thirty-year bond yields decreased 12 basis points 30_YEAR -4.72% to 2.52% — setting a record low.
Yields on 5-year notes 5_YEAR -9.70% fell 6 basis points to 0.60%, also the lowest level ever.
The Labor Department report also showed the number of jobs added in the prior two months were revised lower, and the unemployment rate unexpectedly edged up. See more on payrolls report.
A separate report from the Commerce Department showed Americans’ spending rose faster than their incomes in April, cutting into the savings rate — which economists consider an unsustainable way to foster economic growth. The data include the Federal Reserve’s preferred measure of inflation — the personal consumption expenditure index, which was flat for the month. Read more on consumer spending.
The data raised the chances that the Fed takes steps to loosen monetary policy further and add liquidity to the financial system in the hopes that it will foster more growth in the economy. The Fed’s bond-purchase program, known as Operation Twist, is scheduled to end this month.
“The combined spending, inflation, and employment profile now gives the Fed plenty of cover for additional [quantitative easing] — or at least an extension of Operation Twist,” said Ian Lyngen, a government bond strategist at CRT Capital Group.
Bonds were up before the report following weak economic data out of Europe and China.
In May, Treasurys staged a strong rally after a Greek election left no party with a majority, requiring new elections in June. Also Spain’s yields jumped and its banking problems deepened, prompting investors to seek the relative safety of U.S. government debt. Read more on Treasurys in May.
Deborah Levine is a MarketWatch reporter, based in New York.
