Rising jobless claims add to Fed easing expectations
By Deborah Levine, MarketWatch
SAN FRANCISCO (MarketWatch) — Treasury prices rose on Thursday, pushing yields down for a fifth straight session, after a report showed U.S. first-time jobless claims increased in the latest week.
Yields on 10-year notes 10_YEAR -0.53% , which move inversely to prices, fell as low as 1.67% after the data, before reverting to little changed on the day at 1.70%. Thirty-year bond yields 30_YEAR -0.07% slipped 1 basis point to 2.81%.
A basis point is one one-hundredth of a percentage point.
Yields on 5-year notes 5_YEAR -1.15% also erased an earlier decline to trade at 0.69%, after plunging in the prior session by the most since April.
Bond yields have declined for the past four sessions, including the largest drop in long-term yields since early June on Wednesday, after minutes from the Federal Open Market Committee meeting were more dovish than investors expected. Read more on Treasury yields, Fed.
That increased the odds that the central bank would soon do more to boost the economy, including another round of bond purchases.
“Global markets continue to deal with the aftermath of the FOMC minutes yesterday, which ramped up expectations for additional stimulus in September,” said bond strategists at RBS Securities.
Coupled with reports pointing to more peripheral sovereign debt purchases by the European Central Bank, “central banks are delivering their message this August that they not only stand ready to take further action but they plan on doing so, and doing so soon.”
Initial claims increased by 4,000 to a seasonally adjusted 372,000 in the week ended Aug. 18, the Labor Department said. That’s the highest level in five weeks. Some economists had expected claims to decline in the latest week. Read story on jobless claims.
The claims data added to the odds of more quantitative easing from the Fed, as they underline that the economy continues to bump along – hardly the kind of substantial strengthening the Fed minutes indicated that policy makers need to see in order to hold off on more bond buying.
Claims remain fairly unchanged for most of the year, noted Dan Greenhaus, chief global strategist at BTIG. “The increase in the initial claims data as well as the four-week moving average once again supports the idea that monthly job additions in August will be relatively muted.”
Later in the session, the Treasury Department will announce how much debt it will sell next week, and auction 5-year inflation-indexed debt.
Deborah Levine is a MarketWatch reporter, based in New York.
