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Bonds climb on weaker-than-expected jobs data
NEW YORK - US Treasury debt prices rose on Friday after weaker-than-expected data on non-farm payrolls potentially set the stage for the Federal Reserve to cut benchmark interest rates before the end of the year.
A total of 88,000 jobs were added to the US economy in April, the slimmest increase in more than two years. Economists had forecast 100,000 new jobs for last month.
Investors have been somewhat ambivalent on the Fed’s next move, mulling whether a rate cut is in the offing to stimulate a slowing economy, or whether a rate increase is necessary to quell inflation that remains above the central bank’s presumed comfort range.
The weaker-than-expected data added to the argument the next move will be a cut.
“To me it provides confirmation that the economy is slowing down,” said Michael Strauss, chief economist at Commonfund in Wilton, Connecticut. “It provides confirmation that the Fed needs to think about lower rates this summer.”
Benchmark 10-year Treasury notes US10YTRR were trading 9/32 higher in price for a yield of 4.65 percent compared with 4.68 percent late on Thursday.
The Fed has held the federal funds rate steady at 5.25 percent since last raising it in June. However, it has maintained in its policy statement a bias toward further tightening.
No change in rates is forecast for a Fed policy meeting next week, but some investors are looking for the central bank to back off the tightening bias.
“It is safe for the Fed to move to a fully neutral stand next week, but whether they do that is another question,” said Christopher Low, chief economist at FTN Financial in New York, adding “they certainly won’t cut rates next week.”
New York Fed President Timothy Geithner, speaking on Friday, gave no indication of what was planned for the next week, making no comment on the economy or monetary policy.
Still to come on Friday, Kansas City Fed President Thomas Hoenig will speak on central bank perspectives in Sante Fe, New Mexico. Both Geithner and Hoenig are voters on the Fed’s monetary policy-making committee.
Two-year notes US2YTRR were trading 2/32 higher in price for a yield of 4.67 percent from 4.71 percent late on Thursday, while five-year debt US5YTRR was 6/32 higher for a yield of 4.56 percent from 4.60 percent.
Thirty-year bonds US30YTRR were 16/32 higher in price for a yield of 4.81 percent from 4.84 percent.
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