NEW YORK: US Treasuries prices rose on Thursday after higher than forecast new US jobless claims appeared to increase prospects for accommodative monetary policy in the months and years ahead.
The benchmark 10-year note rose 5/32 on the news, its yield easing to 1.96 percent from 1.98 percent late on Wednesday.
New US claims for unemployment benefits fell last week, but from an upwardly revised number a week earlier, the government said, leaving new claims at 386,000, above Reuters consensus forecast of 370,000.
Economists said the figures could hurt hopes of a pick-up in job creation in April after March's slowdown. The four-week moving average for new claims, considered a better measure of labor market trends, rose 5,500 to 374,750 and support talk of more monetary easing, a bullish development for bonds.
"The prospects for easing are on the table and are always going to be on the table, but the likelihood is slowing moving its way north again," said Sean Incremona, economist at 4CAST LTD in New York. "Euro zone worries, US economy worries -- it doesn't look like it's going to be a risk-on day."
US Treasuries were already holding steady when the initial jobless claims data came out following closely watched auctions of French and Spanish debt overseas, said Thomas Simons, vice president and money market economist at Jefferies & Co. in New York.
France and Spain sold all the bonds they wanted at auction on Thursday, albeit for Spain at the cost of rising yields, indicating growing concerns the government will not be able to tame its deficit.
"Spanish and French auctions lit a fire under the (safe-haven German)bund overnight and we saw the same sort of risk-off demand shift in Treasuries this morning," Simons said.
After a brief respite fueled by a trillion euros of cash the European Central Bank (ECB) lent Europe's banks in December and February, markets are becoming nervous again about euro zone debt loads, with fears that Spain might follow Greece, Ireland and Portugal in the need for a bailout from international lenders.
That has put pressure on bond yields in the region, notably for Spain and Italy.
The Spanish treasury said it sold 2.5 billion euros ($3.3 billion) of two bonds, taking its issuance to half its gross target for the year.
It received bids for 3.3 times the offer on the shorter of the two bonds, and 2.4 times the longer, both up on previous auctions, suggesting Spanish banks were making the most of the ECB's bounty.
France shifted 7.97 billion euros of medium and long-term bonds, with investors bidding for nearly three times the amount on offer, despite jitters on the secondary market before a presidential election that polls suggest will be won by Socialist Francois Hollande in the second round on May 6.
Spain, which has seen debt costs jump since early March, when Prime Minister Mariano Rajoy abandoned the deficit target previously agreed with its European partners, sold 1.1 billion euros of a bond maturing Oct. 31, 2014, at an average yield of 3.463 percent.
Spain also tested market appetite for a longer-term benchmark bond, due Jan. 31, 2022, selling 1.4 billion euros at a yield of 5.743 percent, up from 5.403 percent at the last primary auction in January.
Yields on the 10-year Spanish bond also rose after the auction, suggesting investors remain concerned about the country's long-term fiscal sustainability.
"The Spanish and French debt auctions mattered overnight, but the dominant factor in the New York session was the jobless claims number," said Ian Lyngen, government bond strategist at CRT Capital Group in Stamford, Connecticut. "Now we will watch the Philly Fed (manufacturing activity index) and existing home sales for direction," he said
Economists polled by Reuters estimated the March leading indicators index rose 0.2 percent after a 0.7 percent February increase. They estimate sales of existing homes totaled a seasonally adjusted annualized 4.62 million in March, a slight increase frm the seasonally adjusted annualized 4.59 million in February.
Comments
Comments are closed for this article.