Treasuries decline

US Treasuries fell on Thursday as jobless claims data raised expectations of an improving labour market in coming months, driving a stock rally that drew investors out of safe-haven government debt. New claims for jobless benefits fell to a more than 2-1/2-year low of 368,000 last week, a level typically associated with faster job creation. A decline in oil prices also drove investors' risk appetite.
"The risk trade is back on, and bonds are focused on the economy's fundamentals," said Jason Weiner, portfolio manager of the Marshall Aggregate Bond Fund in Atlanta, Georgia. "The claims data was very strong and supplanted fears about the Middle East and oil prices," he said.
The jobless claims data comes a day ahead of the US government's closely watched monthly payrolls report. Technicals reinforced the move because stocks were "oversold" and bonds "overbought" at the end of February, Weiner added. The US 10-year note yield hovered at support at 3.56 percent while the five-year note yield moved through support at 2.26 percent to 2.29 percent.
"Longer-term Treasury yields will move higher because fundamentals support the idea of 4 percent GDP growth in 2011, and that should push bond yields higher, maybe a percent or more higher on the 10-year note yield," Weiner said. David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut, said the bond market focused on "the consistency with which the labour market is improving across many, if not most measures.
The median forecast of a Reuters poll is for US non-farm payroll growth of 185,000 in February, up from 36,000 new jobs in January. The Institute for Supply Management's non-manufacturing index released on Thursday showed that sector of the US economy expanded in February.
The market focused on the report's employment index, which, according to Goldman Sachs economists, suggested that labour market fundamentals "continue to improve. The New York Fed bought $7.240 billion in Treasury coupons with maturities ranging from May 15, 2018, to February 15, 2021, as part of its ongoing program to spur economic growth. The US Treasury said it would sell $32 billion in three-year notes, $21 billion in nine-year 11-month notes, and $13 billion in 29-year 11-month bonds on Tuesday, Wednesday and Thursday of the coming week. Prices of two-year notes fell 3/32, their yields rising to 0.75 percent from at 0.70 percent on Wednesday.