NEW YORK - U.S. Treasuries prices rose on Friday after the government said the U.S. unemployment rate jumped in October, news that appeared to justify the Federal Reserve’s decision to keep interest rates low and heightened talk about another government stimulus package. U.S. employers cut a deeper-than-expected 190,000 jobs in October, driving the unemployment rate to 10.2 percent, the highest in 26-1/2 years.
“Bond prices rose and justifiably so,” said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida. “The economy remains mired in a deep slump.
“Politically, this will rekindle talk about Stimulus II or III — another formal stimulus package,” he said.
Benchmark 10-year notes up 4/32 immediately before the report, were up 10/32 afterward, their yields easing to 3.49 percent from 3.51 percent just before the report and 3.53 percent late on Friday.
“It’s very clear the Fed made the right choice on Wednesday to leave policy unchanged and make another commitment to leave the funds rate at exceptionally low level for an extended period,” Sullivan said. “This is a startling commentary on the business community’s unwillingness to hire workers, despite the fact that we’re in the ninth month of massive programs to stimulate the economy from both the Fed and the government.”
The U.S. central bank said on Wednesday it would hold benchmark interest rates steady near zero and reiterated rates would remain low for an “extended” period. In its statement, the Fed listed the economic conditions that necessitate exceptionally low rates as “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”
Sullivan said losses of 589,000 jobs in the household survey data reinforced the picture of labor market weakness as the fourth quarter got underway. So did an average workweek length of just 33 hours, an historic low reached in September.
An alternate measure of employment comprised of people who want a full-time job, but can’t get one, stood at 17.5 percent, Sullivan said. And the unemployment rate for full-time workers stood at a “stunning” 11.1 percent, he said.
Thirty-year bonds rose 6/32 in price, with their yields easing to 4.39 percent from 4.40 percent late on Thursday. Two-year notes, sensitive to potential changes in Fed policy, rose 1/32, their yields easing to 0.87 percent from 0.89 percent late on Thursday.
Traders said some of the bond market’s gains could be trimmed going into the weekend ahead of supply. The Treasury will sell $81 billion of three-, 10- and 30-year securities on Monday, Tuesday, and Thursday, respectively.
The Labor Department revised job losses for August and September to show 91,000 fewer jobs lost than first reported.
