Treasuries Fall as U.S. Economy Adds Jobs for First Time in Seven Months
from Bloomberg
By Heather Bandur
New York, March 8 (Bloomberg) -- U.S. Treasuries fell for a seventh day after the government said the economy added jobs last month for the first time since July, boosting concern the Federal Reserve will raise interest rates by midyear.
The decline marks the longest losing streak in almost 10 years for the benchmark 10-year Treasury note.
``It will be tough for the market to be anything but negative on this report,'' said Andrew Pyle, senior economist at Scotia Capital in Toronto. ``It will advance speculation of a nearer- term'' rate increase by the Fed, he said.
The 4 7/8 percent note maturing in 2012 fell more than 1/2, or $5 per $1,000 face amount, to 96 25/32. Its yield rose 8 basis points to 5.30 percent, the highest level since July 9. The 3 percent note maturing in 2004 lost 1/8 to 99 2/32, driving its yield up 8 basis points to 3.50 percent, a six-month high. A basis point is equivalent to 0.01 percentage point.
Treasuries slumped after the Labor Department said non-farm payrolls rose by 66,000 in February, while the unemployment rate dropped to 5.5 percent from 5.6 percent in January. Economists surveyed by Bloomberg had expected no change in the payroll number, and a 0.2 percent gain in the jobless rate.
Traders drove Eurodollar futures contracts higher, betting the central bank will be quick to raise the federal funds target for overnight bank loans. The yield on the September contract rose 8 basis points to 3.135, reflecting expectations for the Fed to raise rates 75 basis points, to 2.50 percent, by September.
The contract's yield has surged more than half a point since Feb. 27.
The contract is a gauge of three-month interest rates, which are typically 18 to 25 basis points higher than the Fed's target rate for overnight loans between banks, plus a premium for how long in the future the contract settles.
`Well Under Way'
The Fed lowered its target rate 11 times last year to a 40- year low of 1.75 percent, sparking a 10-month bond rally that sent 10-year note yields to a three-year low.
Investors yesterday drove 10-year yields to the highest level in eight months after Fed Chairman Alan Greenspan said an economic rebound is ``well under way.'' His comments led some to predict the central bank will change its stance to say the risks facing the economy are balanced between faster inflation and weak growth at its March 19 meeting. It has classified weak growth as the greatest threat to the economy since Dec. 19, 2000.
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Best Rgards, J.T. |
