Ouch, I bought a little RYJUX early
in the week, my first 1/4th of a
a position. About a week early, smack!
Reuters
Treasuries Soar as Jobs Data Shackles Fed
Friday March 5, 9:34 am ET
By Wayne Cole
NEW YORK (Reuters) - Treasury prices soared on Friday, driving benchmark yields to eight-month lows, as a shockingly weak report on U.S. payrolls was seen delaying a Federal Reserve rate hike for months if not all year.
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Nonfarm payrolls rose just 21,000 in February, well below forecasts of a 125,000 gain and the latest in a string of disappointing reports. January's jobs result was revised down to 97,000 from 112,000 and December was revised a little lower as well. The unemployment rate stayed at 5.6 percent.
"It's a weak report. The bond market is reacting favorably because the implication is that the timing for a Fed rate hike is pushed farther out," said Joseph LaVorgna, chief U.S. fixed income economist at Deutsche Bank Securities.
That was music to the ears of fixed-income investors who have been making piles of money on the carry trade -- borrowing at low short-term rates to lend at higher longer-term rates.
The benchmark 10-year note (US10YT=RR) leapt 1-24/32 in price, driving yields to 3.80 percent from 4.02 percent on Thursday. That was the biggest daily fall in at least three years and smashed a 3.90/91 percent barrier which had marked the floor for yields since last July.
Five-year notes (US5YT=RR) jumped 1-3/32, taking their yields down 2.75 percent from 2.99 percent on Thursday. The 30-year bond (US30YT=RR) soared over two full points, compressing its yield to 4.72 percent from 4.88 percent.
Two-year notes (US2YT=RR), the most reflective of market thinking on Fed policy, flew 10/32 higher. Their yield plunged to 1.54 percent from 1.71 percent, the lowest level since October and the biggest daily drop in three months.
Likewise, Eurodollar futures (0#ED:) romped ahead as the market scaled back the risks of rate hikes this year. The December contract rose 0.21 point to 98.415, implying a three-month interest rate of 1.58 percent, not that far above the current 1.00 percent Fed funds rate.
The fury of the move showed just how important the lack of jobs has become, both for monetary policy and in politics.
"Despite all the signs that economic activity and job creation should have picked up, we're just not seeing it in the numbers yet," said Steven Wood, chief economist at Insight Economics.
He believes the Fed still needs to see three or four months of 200,000-plus growth in payrolls before thinking about tightening policy.
"With the election staring us in the face not too far down the road, I think we're probably talking '05 before the Fed has to contemplate raising rates," said Wood.
There was also relief among traders that, despite the dollar's recent surge, some overseas central banks still seemed to be busy intervening to buy dollars and investing those funds in U.S. debt.
Figures from the Fed late Thursday showed foreign central banks bought a hefty $14 billion in Treasuries in the week to Wednesday and the forex market was full of talk that the Bank of Japan was still intervening almost every day. |
