Bloomberg News

Treasury Yield Drop Is ‘No Brainer,’ Rosenberg Says: Tom Keene

June 01, 2011

June 1 (Bloomberg) -- Treasury yields will keep falling amid slowing growth and fading stimulus measures until a “dramatic and sustainable” improvement in the economy stops them, said David Rosenberg of Gluskin Sheff + Associates.

U.S. 10-year note yields slid below 3 percent today for the first time this year as data showed U.S. firms added fewer jobs in May than economists forecast and manufacturing expanded at the slowest pace in more than a year. The Federal Reserve’s $600 billion Treasury-purchase plan to spur the economy ends in June.

“It comes down to Newton’s first law of motion: a ball is going to stay in motion until some countervailing force will cause it to move the other direction,” Toronto-based Rosenberg, the firm’s chief economist, said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “Now the cupboard is bare; when you look at fiscal or monetary policy it’s going to be slowing down, so to me it’s a no-brainer why yields are trending lower right now.”

Yields on the benchmark 10-year note fell as much as 11 basis points, or 0.11 percentage point, to 2.95 percent, the lowest level since Dec. 7. ADP Employer Services said U.S. companies added 38,000 workers in May. That compared with 177,000 hired in April and a Bloomberg News survey forecast of 175,000. The Institute for Supply Management’s factory index fell to 53.5 in May, the lowest since September 2009.

Growth in U.S. nonfarm payrolls slowed to 175,000 jobs in May from 244,000 in April, economists in a Bloomberg survey forecast before the Labor Department reports the data on June 3.

Acceleration in Economy

“The only thing that can really boost yields on a sustained basis is if we can get a dramatic and sustainable acceleration in economic activity,” said Rosenberg, former chief economist for North America for Merrill Lynch & Co.

The central bank’s bond-buying program, the second round of stimulus under quantitative easing, fell short in bringing down interest rates on a sustainable basis, Rosenberg said.

Credit Suisse Group AG cut its nonfarm-payroll growth forecast after the ADP report, Ira Jersey, an interest-rate strategist at Credit Suisse, said in a separate Bloomberg Radio interview.

The bank, one of 20 primary dealers that trade Treasuries with the Fed, reduced its estimate to 120,000, from 185,000, Jersey said.

“A big miss like this, that 38,000, means expectations for Friday have to be moved down,” Jersey said. “Certainly the Treasury market is revising down its own expectations for growth.”

--With assistance from Timothy R. Homan in Washington and Cordell Eddings in New York. Editors: Greg Storey, Dave Liedtka

To contact the reporters on this story: John Detrixhe in New York at; Tom Keene in New York at

To contact the editor responsible for this story: Dave Liedtka at

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