Yields rise on strong jobs data, as stocks gain

NEW YORK: US Treasury yields rose on Wednesday after ADP jobs data for October boosted expectations for a strong employment report on Friday, while stronger stock markets reduced safe haven demand for U.S. government debt.

The ADP National Employment Report showed that private employers added 227,000 jobs in October, the most since February and more than economists' expectations of 189,000 jobs.

"The data was strong. It does raise the expectation of a stronger payroll coming on Friday," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

Friday's payrolls report will be watched for signs of rising wage pressures in addition to jobs gains.

U.S. labor costs accelerated in the third quarter as wages for both private and government workers surged amid tightening labor market conditions.

Benchmark 10-year Treasuries fell 11/32 in price to yield 3.149 percent, up from 3.109 percent on Tuesday. The yields are holding below a more than seven-year high of 3.261 percent on Oct. 9.

U.S. stocks opened higher on Wednesday as Facebook led a slew of encouraging earnings reports.

Treasuries have largely moved in lock-step with stocks in the past few weeks, with yields rising and falling with equity prices.

Recent volatility in stocks has raised some speculation that weak markets could derail the Federal Reserve's plans to further hike interest rates.

A stronger than expected payrolls report on Friday, however, could renew expectations that the U.S. central bank will remain hawkish, and in that case "you could see further volatility going through in equities and rates," said Goldberg.

Interest rate futures traders are pricing in a 72 percent chance of a December rate hike, up from 70 percent on Tuesday, according to the CME Group's FedWatch Tool.

The Treasury Department said on Wednesday it will boost the size of debt auctions again in the coming quarter, as expected.

It will increase two-year, three-year and five-year note auctions by $1 billion per month over the next two months. In November, it will increase the size of its two-year fixed rate note auction by $1 billion and also boost the size of auctions for seven-year and 10-year notes as well as 30-year bonds by the same amount during the month.

The Treasury said it was also creating a new five-year inflation-protected security issuance, with its first auction to be held in October 2019.