Weak U.S., European data lift bond prices

NEW YORK - U.S. government debt prices rose on Wednesday as data signaling further weakness in European manufacturing and weakening U.S. job growth fueled expectations of a global slowdown and stoked safehaven demand for low-risk investments.

By (Reuters)

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Published: Wed 2 May 2012, 8:28 PM

Last updated: Tue 7 Apr 2015, 11:11 AM

The latest data on both sides of the Atlantic also fed expectations the U.S. Federal Reserve and European Central Bank might provide more stimulus to support their economies, which would be positive for the bond market, analysts said.

“On balance, they are supportive of Treasuries,” said Stan Shipley, bond strategist at the ISI Group in New York.

U.S. payroll processor ADP said its national employment report showed companies added 119,000 jobs in April, falling short of the expected 177,000 increase and the smallest monthly rise in seven months. The March increase was revised down to 201,000 from 209,000.

At 10 a.m. (1400 GMT), the government will release its data on factory orders, which is forecast to have fallen 1.6 percent in March due to weakening demand for durable goods.

Earlier, data from the euro zone showing a deepening contraction in manufacturing in the region intensified worries that even its strongest economies are buckling from the contagion of the fiscal woes of their heavily indebted neighbors..

Those concerns revived bids for low-risk U.S. and German government securities. Five-year and 10-year Bund yields fell to record lows, according to Reuters data.

Treasuries prices on the other hand held at key chart resistance as traders remained reluctant to push prices higher to make yields test lower trading ranges before Friday’s payroll data, investors said.

“We have to see whether last month’s number would be reversed,” James Barnes, a bond portfolio manager at National Penn Investors Trust Co. in Wyomissing, Pennsylvania, which manages $2.5 billion in assets, said of the March payrolls report that showed a weaker-than-expected 120,000 increase.

Some analysts said the slowdown in hiring in March and April is a “payback” from earlier this year when construction and other weather-sensitive industries either fired fewer workers or hired more of them due to the unusually mild winter.

The U.S. Labor Department will release its April jobs report on Friday at 8:30 a.m. (1230 GMT). Economists expect employers likely added 170,000 jobs in April after a disappointing 120,000 gain in March.

On the supply front, the Treasury Department will sell a combined $72 billion in new three-year, 10-year and 30-year debt next week at its May quarterly refunding, matching the same amount sold in February. It expects to raise $35.3 billion in new cash from the debt sales.

The Treasury said it has not made decisions on whether to begin issuing floating-rate securities or to accept negative yield bids at regular bill and coupon debt auctions.

The Federal Reserve will sell $1.00 billion $1.50 billion in Treasury Inflation Protected Securities at 11 a.m. (1500 GMT)

In the open market, benchmark 10-year Treasury notes traded up 11/32 in price to yield 1.91 percent, down 4 basis points from late on Tuesday.

The 10-year yield is stuck in a tight trading range. It has been holding below the key 2 percent chart support level, which is also the Fed’s implicit target on inflation. It has struggled to break below 1.90 percent, which would make 10-year notes expensive for some investors.

Thirty-year bonds rose 25/32 in price for a 3.11 percent yield, down 4 basis points from Tuesday’s close.


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