-- US Treasuries rise as attack warning offsets jobs --
(Adds analyst comments, updates prices, changes byline,
dateline, previous CHICAGO)
By Pedro Nicolaci da Costa
NEW YORK, Feb 7 (Reuters) - Heightened fear of an attack on
U.S. interests after a government warning on Friday helped
Treasuries stage a comeback from earlier losses registered in
the wake of a surprise drop in the nation's unemployment rate.
The nation's color-coded threat assessment was raised to
"orange", the second highest level, reflecting a high risk of
attack and luring investors back into safe-haven bonds after the
jobs report prompted a short-lived flirtation with risk.
The government's survey of households showed the jobless
rate sliding to 5.7 percent when Wall Street had expected it to
stay at 6 percent. But some analysts cautioned the fall was
largely due to seasonal revisions to the data and did little to
suggest concrete rebound in job creation.
"Most of the increase was just a seasonal swing," said Jade
Zelnik, chief economist at RBS Greenwich Capital in
Connecticut. "The January number does not suggest this the
beginning of an upturn -- that remains to be seen."
After an initial slide in Treasuries, the government's
warning of an increased chance Al-Queda could attack soft U.S.
targets, such as apartment buildings and hotels, breathed some
life back into bonds.
Even the jump in payroll employment failed to fully convince
analysts the nation's fragile labor market had overcome its
troubles.
Nonfarm payrolls jumped 143,000 in January compared with
average market forecasts of a 70,0000 rise, but analysts noted
that unadjusted for seasonal factors, employment actually fell by
2.72 million in January as retailers laid off temporary staff.
Faced with a dismal holiday shopping season at the end of
last year, retailers seem to have hired fewer workers in the
run-up to Christmas, so there were fewer employees to fire.
Adjusted retailing jobs subsequently rose 101,000 in January so
reversing a drop of 99,000 the month before.
"January just offset December almost job for job." said
Carol Stone, deputy chief economist at Nomura Securities.
"Companies didn't have to hire as many workers for the holiday
shopping season, so they didn't have to lay as many off."
Analysts also took issue with the household survey used to
derive the unemployment figures, particularly the huge 1.1
million jump in employment reported, which just did not gel with
other evidence on the economy.
The Bureau of Labor Statistics itself said that, due to
several changes to methodology, the January survey was not
strictly comparable to prior months.
Treasury prices plunged immediately after the jobs report,
but quickly rebounded as doubts about the data's reliability
set in and news of the government's warning about the
heightened risk of an attack scared investors back into bonds.
Two-year notes <US2YT=RR> rose 3/32 in price taking yields
to 1.61 percent at 3 p.m. (2000 GMT) from 1.66 percent on
Thursday. The 10-year note <US10YT=RR> gained 6/32, yielding
3.92 percent from 3.95 percent.
Global tensions provided a supportive background for safe-
haven Treasuries, with U.S. President George W. Bush telling
Iraqi leader Saddam Hussein that "the game is over,"
reinforcing the market's conviction a war is on its way despite
the reservations of key allies.
Stocks slipped on the day, with the Dow Jones Industrial
average <.DJI> off 1.1 percent and the tech-leaning Nasdaq
composite down 1.6 percent.
Investors will turn their attention to a visit this weekend
by top U.N. inspectors, including chief Hans Blix, ahead of
their Feb. 14 address to the U.N. Security Council.
The unease was reflected in a jump in oil prices to two-year
highs, a development generally seen as positive for bonds these
days since higher gasoline prices act as a tax on the U.S.
consumer and eat into spending power.
On the downside for Treasuries is the specter of looming
supply with $42 billion in new five- and 10-year notes due to
be auctioned next week.
((Reporting by Pedro Nicolaci da Costa; editing by Andre Grenon;
Reuters Messaging: pedro.dacosta.reuters.com@reuters.net; email:
pedro.dacosta@reuters.com))
--------------MARKET SNAPSHOT AT 2001 GMT ------------------
Mar T-Bond <USH3> 113-02/32 (+13/32)
Mar 10-year note <TYH3> 114-19/32 (+08/32)
Change vs Current
Nyk yield
Three-month bills<US3MT=RR> 1.15 (unch) 1.172
Six-month bills <US6MT=RR> 1.17 (-0.02) 1.191
Two-year note <US2YT=RR> 100-01/32 (+03/32) 1.609
Five-year note <US5YT=RR> 100-17/32 (+07/32) 2.880
10-year note <US10YT=RR> 100-21/32 (+07/32) 3.919
30-year bond <US30YT=RR> 108-28/32 (+09/32) 4.795
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nN07128580
US/ US/N
Symbols:
US&DJI US;COMP
07-Feb-2003 20:24:30 GMT
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