Bloomberg News

Treasury Futures Stay Lower Before Jobs Reports

January 03, 2013

Treasury 10-year futures contracts stayed lower after tumbling for two days as economists said reports this week will show hiring picked up.

U.S. government securities fell 0.9 percent in the past month, the biggest loss among 26 debt-market indexes tracked by Bloomberg and the Federation of Financial Analysts Societies. Bonds slid yesterday after U.S. lawmakers agreed on a plan to avert most of the tax increases and spending cuts scheduled to start this year that threatened the world’s biggest economy. Treasuries were closed in Japan today for a holiday.

Ten-year futures contracts for March delivery were little changed at 132 6/32 as of 1:35 p.m. in Singapore. They dropped 5/8 yesterday, the most in 11 weeks. Trading of bonds, notes and bills is scheduled to take place as usual today in the U.K. and the U.S., according to the Securities Industry and Financial Markets Association website.

“Yields will go a little higher,” said Marc Fovinci, the head of fixed income in Portland, Oregon at Ferguson Wellman Capital Management Inc., which has $3.2 billion in assets. “The partial resolution of our fiscal cliff has taken an immediate recession off the table, and that has reduced the flight-to- quality bid in the market.”

Ten-year yields may rise to 2.25 percent in a year from today’s 1.84 percent, he said. Ferguson Wellman is favoring U.S. corporate bonds over Treasuries, he said.

Slower Growth

There will still be new taxes, which will cap yields, he said. The revenue plan led Ferguson Wellman to cut its forecast for economic growth in 2013 in half to 1.5 percent, he said.

Companies in the U.S. probably added 140,000 jobs in December, versus 118,000 in November, based on the Bloomberg News survey of economists before ADP Research Institute reports the figure at 8:15 a.m. New York time today.

A Labor Department report tomorrow will show the U.S. gained 150,000 positions in December, versus 146,000 in November, based on responses from economists. The jobless rate held at 7.7 percent, the least since 2008, according to the surveys. A private report yesterday showed a pickup in manufacturing.

The Federal Reserve plans to buy as much as $5.25 billion of Treasuries maturing from January 2017 to September 2017 today, according to the Fed Bank of New York website. The central bank announced in December it will scoop up $45 billion of Treasuries a month as part of its efforts to spur the economy.

The new purchases won’t involve selling shorter-term securities, ending the central bank’s maturity-extension program known as Operation Twist.

The Treasury Department is scheduled to announce today the sizes of 3-, 10- and 30-year auctions scheduled for next week.

The U.S. will sell $32 billion of 3-year notes, $21 billion of 10-year securities and $13 billion of 30-year bonds over three days starting Jan. 8, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey.

The amounts are unchanged from the last time the government sold this combination of securities in December.

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net.


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