LONDON: US Treasury debt prices held steady in Europe on Thursday as the market paused after rally the previous day spurred by disappointing private sector hiring in the United States and weakness in European manufacturing.
Activity was expected to be subdued with investors reluctant to push yields out of recent tight ranges before market-moving US nonfarm payrolls data on Friday. The US economy is expected to have created 170,000 jobs in April compared with 120,000 the previous month, according to the consensus outcome of economists surveyed by Reuters.
Treasuries rose on Wednesday after payroll processor ADP said companies added 119,000 jobs in April, undershooting an expected 177,00 increase and the smallest monthly rise in seven months.
Although traders said the ADP report was seldom an accurate gauge of nonfarm payrolls, it threw Friday's report into sharp focus with investors fretting that the US labour market may be losing momentum.
"We're going (into the payrolls) yielding 1.94 percent in US (10-year T-notes) and that's relatively low... The risk to the bond market is that we get a higher number," a trader said. "The risk is it comes in at 200-250K and the market sells off...We could easily trade at over 2 percent if it comes at consensus at 150K."
The benchmark T-note yield was last at 1.93 percent, little changed from late US trade, as was the 30-year T-bond yield at 3.11 percent.
The 10-year yield has been holding below the key 2-percent chart support level, which is also the Federal Reserve's implicit target on inflation, in recent weeks with a fresh flare-up in the euro zone debt crisis supporting demand for lower risk investments.
* "A lot of people are arguing that 2 percent is unsustainble but Europe is only going to get worse... We get supply next week which will likely cap any big rally in Treasuries," the trader said.
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