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To: pallmer who wrote (5561)	2/7/2003 3:25:46 PM
From: pallmer	Read Replies (2) \| Respond to of 29599

-- 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 (C) Reuters 2003. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world. nN07128580 US/ US/N Symbols: US&DJI US;COMP 07-Feb-2003 20:24:30 GMT Source RTRS - Reuters News