BLBG: Treasury Two-Year Notes Advance as Employers Add Fewer Jobs Than Forecast
Treasury 2-year note yields fell after U.S. employers added fewer jobs in November than economists forecast, reigniting concern the pace of the economic recovery will slow.
Government debt gained for the first time in three days as the 39,000 increase in jobs underscored the Federal Reserve’s decision to pump more money into the economy to spur growth. The central bank will acquire $6 billion to $8 billion of Treasuries as part of its $600 billion plan to keep borrowing costs low to support growth. Treasuries pared gains after a report showed service industries expanded in November at the fastest pace in six months.
“I don’t see anything good in the numbers,” said John Briggs, a U.S. government bond strategist at Royal Bank of Scotland’s RBS Securities unit in Stamford, Connecticut, one of 18 primary dealers that trade with the Fed. “There’s a lot of wood to chop on the employment front and companies seem to be reluctant to continue hiring.”
The yield on the 2-year note fell six basis points, or 0.06 percentage point, to 0.48 percent at 10:12 a.m. in New York, according to BGCantor Market Data. The price of the 0.5 percent security maturing in November 2012 rose 4/32, or $1.25 per $1,000 face amount, to 100 1/32.
Ten-year note yields fell two basis points to 2.98 percent after touching 3.04 percent, the highest since July 28.
Detail Jobs
Payrolls increased less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The median forecast of 87 economists in a Bloomberg News survey was for 150,000 more jobs.
The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated.
“This presents the march to 3 percent on the 10-year note with a big speed bump and will likely slow the upward momentum in yields, if not stop it,” said, Anthony Crescenzi, a bond strategist at Newport Beach, California-based Pacific Investment Management Co., which runs the world’s biggest bond fund. very is broadening out as the year comes to a close.
The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, rose to 55 last month from 54.3 in October. A reading higher than 50 signals growth.
Fed policy makers on Nov. 12 started a $600 billion second round of asset purchases to support growth in the economy and to reduce unemployment and avert deflation. The U.S. central bank is scheduled to buy Treasuries maturing from June 2013 to November 2014 today as part of its plan, according to the New York Fed’s website.
Employment Days
Before the drop in the payrolls data have pointed to an improving economy. The Fed said Dec. 1 the economy gained strength in 10 of its 12 regions as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season.
Treasuries 10-year notes fell 19 basis points this week before Friday amid speculation that a better than expected ADP employment on Dec. 1 would point to a stronger employment report. However the drop in payrolls came in lower than even the lowest estimate of 75,000 in a survey of 87 economists surveyed by Bloomberg.
Pimco Co-Chief Investment Officer Bill Gross said the Fed is unlikely to raise interest rates for several years with employment growing less than forecast. The front end of the yield curve is the best segment forinvestors with the Fed on hold, Gross, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene.
The 10-year note yield will end the year at 2.64 percent, according to the average forecast in a Bloomberg News survey of 63 banks and securities companies, with the most recent estimates given the heaviest weightings. The two-year note yield is expected to end 2010 at 0.5 percent.
Next week’s government debt sales will include $32 billion of three-year notes on Dec. 7, $21 billion of 10-year securities the following day and $13 billion of 30-year bonds on Dec. 9.
To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net;
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
