(Bloomberg) — Signs this week that the U.S. economic recovery is largely intact prevailed in the Treasury market.
Benchmark 10-year yields are set to finish higher than they were seven days ago. A Labor Department report on April 3 showed jobs growth that was weaker than analysts anticipated, prompting investors to push back the outlook for the timing of the first interest-rate increase by the Federal Reserve in almost a decade.
A $13 billion auction of 30-year debt on Thursday met the weakest demand in 11 months, sending yields on the bonds to a three-week high. Local demand slumped, pushing the amount bought by foreigners to more than half the securities allotted. A report the same day showed fewer Americans applied for unemployment benefits over the past four weeks than at any time in almost 15 years. Minutes of the latest Federal Open Market Committee policy meeting released April 8 showed some hawkish officials argued for monetary tightening as early as June.
"After the initial scare on Good Friday because of the weak nonfarm payrolls, we didn't see a major deterioration in other data," said Philip Marey, a senior market economist at Rabobank Groep in Utrecht, the Netherlands. "The recovery continues, albeit at a somewhat slower pace and since we haven't seen other data showing a further deterioration, which has been helpful" in pushing yields higher, he said.
The benchmark Treasury 10-year yield was little changed at 1.95 percent as of 7:09 a.m. New York time, according to Bloomberg Bond Trader data. The yield increased 11 basis points, or 0.11 percentage point, this week, the most in a month. The price of the 2 percent note due in February 2025 was 100 13/32.
Jobs report
On April 3, the 10-year yield slid seven basis points, the most since March 18, as data showed U.S. employers added the fewest workers in March since December 2013. Since then, other reports showed service industries grew last month at about the same pace as in February, while consumer confidence increased last week to an almost eight-year high.
Oil prices that headed for the longest stretch of weekly gains since February 2014 have raised speculation that inflation will quicken.
Demand for Treasuries also waned after Greece met its cash obligation to the International Monetary Fund, dimming the appeal of the U.S. debt as a haven, Rabobank's Marey said. The cash-strapped country also secured an increase in European Central Bank emergency funding available to its lenders.
