Treasurys falter on strong jobs report
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:33 PM ET Mar 9, 2001
NEW YORK (CBS.MW) - Government bond issues fumbled as a sturdy employment report proved intimidating to buyers, generating concerns that the Fed may not need to be as aggressive on the easing front as previously expected.
But turmoil in the stock market -- with the Nasdaq setting a new low for the year and coming within a whisper of the 2,000 mark -- tempered additional losses in the fixed-income arena.
Non-farm payrolls rose 135,000 in February, more than the 88,000 that had been expected. The unemployment rate stood at 4.2 percent, unchanged from the previous month's reading and within expectations. Finally, average hourly earnings rose by 0.5 percent, more than the expected 0.3 percent increase. See full story.
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Checking prices, a 10-year Treasury note was off 9/32 at 100 13/32 to yield ($TNX: news, msgs, alerts) 4.945 percent while the 30-year government bond erased 7/32 reaching 100 24/32 to yield ($TYX: news, msgs, alerts) 5.325 percent.
A Fed-sensitive 2-year note lost 3/32 to yield 4.465 percent while the 5-year Treasury note shed 5/32 to yield 4.715 percent. Turning to the yield curve, the spread between a 30-year Treasury bond and a 2-year note stood at 85 basis points compared to 89 basis points at the close Thursday, indicating that short maturities were underperforming issues with a longer maturity date.
The front end of the yield curve predictably lagged the long end as bonds investors pared back some of their easing expectations in light of Friday's not-too-shabby jobs report.
In the currency arena, dollar/yen lost 0.2 percent to 119.46 after climbing above the 120 mark over the past couple of trading sessions for the first time since July 1999. Euro/dollar, meanwhile, edged up 0.1 percent to 0.9324.
In the equity market, the Dow Jones Industrials Average ($DJ: news, msgs, alerts) tumbled 213 points, or 2 percent, to 10,629 while the Nasdaq Composite ($COMPQ: news, msgs, alerts) plunged 115 points, or 5.3 percent, to 2,052. See Market Snapshot.
Elsewhere, Trim Tabs reported that bond funds got inflows of $300 million over the week ending March 7 vs. outflows of $600 million in the prior week.
A look into the numbers
Within the payrolls number, manufacturing jobs fell a lofty 94,000 in February. But strength in the government and construction sectors offset weakness in the factory space. And the January payrolls figures were downwardly revised to show a 224,000 increase vs. the previously reported 268,000.
Tony Crescenzi, chief bond market analyst at Miller Tabak & Co, said that the payroll gain of 135,000 is significant for a number of reasons. The increase followed an above-trend gain in January for one, and the continued gains in job growth suggest that the economy is not in recession.
"In a recession, job losses of 200,000 per month are the norm. Recent jobs data has not even remotely approached that. The gain suggests that market pessimism over the economy is excessive," Crescenzi concluded.
"We have a two-sided economy where manufacturing continues to collapse while construction and services are doing just fine," observed Joel Naroff, chief economist at Naroff Economic Advisors.
Naroff added that in determining what to do at the March 20 Fed meeting, the FOMC members will have to decide whether manufacturing will pull down the rest of the economy or whether the rest of the economy will rescue manufacturing. |
