By Burton Frierson
NEW YORK, Oct 2 (Reuters) - U.S. Treasury debt prices fell on Friday, pulling 30-year yields back from five-month lows, as investors brushed aside a dismal jobs report to take profits ahead of next week's bond auctions.
The bond selloff appeared odd after the government's monthly jobs report showed a far steeper decline in September payrolls than expected as bad news would normally be bullish news for safe-haven Treasuries. For story, see
Investors, however, appeared to have anticipated the surprisingly bad jobs report on Thursday, when they bid up bonds in the biggest Treasuries rally in two months, but next week's $78 billion in debt auctions gave reason to take profits promptly.
'If you're a bond trader and you've got $78 billion worth of supply coming next week this is the perfect opportunity to sell into strength and set up for all that supply,' said James Caron, co-head of global rates research at Morgan Stanley in New York.
Caron added, though, that the data argued in favor of bonds.
'With worsening data, particularly the nonfarm payrolls, it's going to force people into the bond market,' Caron said.
The pre-supply selling pushed the 30-year Treasury bond down more than a point on the day in afternoon trade. It was last down 25/32 to yield 4.00 percent.
That yield was up from a five-month low of 3.89 percent hit earlier on Friday.
Despite the day's losses, the bond market still posted its second week of gains, with benchmark 10-year yields down about nine basis points since last Friday. That follows an 18 basis point drop during the previous week.
The 10-year note was last down 10/32, yielding 3.22 percent versus Thursday's close of 3.18 percent. Before the selloff set in, yields fell as low as 3.11 percent, their lowest since mid-May.
The U.S. Treasury is bringing four different bonds to market next week, starting with Monday's $7 billion reopening sale of 10-year inflation-indexed notes originally issued on July 15.
Next comes $39 bln worth of three-year notes on Tuesday, $20 billion of reopened conventional 10-year notes on Wednesday and $12 billion worth of reopened 30-year bonds on Thursday.
Treasury auctions may benefit from the weak nonfarm payrolls report, which was the latest in a string of disappointing data releases this week pointing to a gradual and fragile recovery from the worst recession in decades.
Investors generally prefer conservative investments that offer a guaranteed yield during times of economic weakness, and Treasuries are among their traditional favorites in this category.
However, some investors may be reluctant to buy at the top of the market, making dealers likely to push for a price concession in the coming days.
'Let us remind that as bullish as the action was (over the) last week, we're still challenged by the predictable need to accommodate large Treasury auctions,' said said David Ader, head of government bond strategy at CRT Capital in Stamford, Connecticut.
(Reporting by Burton Frierson) (burton.frierson@thomsonreuters.com;+1 646-223-6292; Reuters Messaging: burton.frierson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Oct 2 (Reuters) - U.S. Treasury debt prices fell on Friday, pulling 30-year yields back from five-month lows, as investors brushed aside a dismal jobs report to take profits ahead of next week's bond auctions.
The bond selloff appeared odd after the government's monthly jobs report showed a far steeper decline in September payrolls than expected as bad news would normally be bullish news for safe-haven Treasuries. For story, see
Investors, however, appeared to have anticipated the surprisingly bad jobs report on Thursday, when they bid up bonds in the biggest Treasuries rally in two months, but next week's $78 billion in debt auctions gave reason to take profits promptly.
'If you're a bond trader and you've got $78 billion worth of supply coming next week this is the perfect opportunity to sell into strength and set up for all that supply,' said James Caron, co-head of global rates research at Morgan Stanley in New York.
Caron added, though, that the data argued in favor of bonds.
'With worsening data, particularly the nonfarm payrolls, it's going to force people into the bond market,' Caron said.
The pre-supply selling pushed the 30-year Treasury bond down more than a point on the day in afternoon trade. It was last down 25/32 to yield 4.00 percent.
That yield was up from a five-month low of 3.89 percent hit earlier on Friday.
Despite the day's losses, the bond market still posted its second week of gains, with benchmark 10-year yields down about nine basis points since last Friday. That follows an 18 basis point drop during the previous week.
The 10-year note was last down 10/32, yielding 3.22 percent versus Thursday's close of 3.18 percent. Before the selloff set in, yields fell as low as 3.11 percent, their lowest since mid-May.
The U.S. Treasury is bringing four different bonds to market next week, starting with Monday's $7 billion reopening sale of 10-year inflation-indexed notes originally issued on July 15.
Next comes $39 bln worth of three-year notes on Tuesday, $20 billion of reopened conventional 10-year notes on Wednesday and $12 billion worth of reopened 30-year bonds on Thursday.
Treasury auctions may benefit from the weak nonfarm payrolls report, which was the latest in a string of disappointing data releases this week pointing to a gradual and fragile recovery from the worst recession in decades.
Investors generally prefer conservative investments that offer a guaranteed yield during times of economic weakness, and Treasuries are among their traditional favorites in this category.
However, some investors may be reluctant to buy at the top of the market, making dealers likely to push for a price concession in the coming days.
'Let us remind that as bullish as the action was (over the) last week, we're still challenged by the predictable need to accommodate large Treasury auctions,' said said David Ader, head of government bond strategy at CRT Capital in Stamford, Connecticut.
(Reporting by Burton Frierson) (burton.frierson@thomsonreuters.com;+1 646-223-6292; Reuters Messaging: burton.frierson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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