Long-dated US Treasury debt prices fell on Thursday as investors pared bond holdings in advance of a key government jobs report, which might top expectations following recent data suggesting a resilient US economy. "Equities are doing better, but there's no resolution in Europe. There is no definitive trend in any of these markets," said Laura LaRosa, director of fixed income at Glenmede, in Philadelphia, Pennsylvania, which manages about $20 billion.
Longer-dated Treasuries posted another choppy session on slightly below-average trading volume, while shorter-dated issues held in tighter ranges. Ten-year Treasury note prices fell to session lows after payrolls processor ADP said private employers added 325,000 jobs in December, easily beating economists' expectations for a gain of 178,000 jobs. This figure raised expectations the government's employment report on Friday might show a significant number of new jobs were added last month.
But 10-year note prices recovered as stock prices fell and analysts downplayed the ADP number as being inflated by seasonal factors. They later touched session highs after a report on US services industries fell short of expectations. The 10-year note last traded down 1/32 in price for a yield of 1.99 percent after bouncing between 1.94 and 2.02 percent. It closed at 1.98 percent on Wednesday.
The 30-year Treasury bond was down 14/32, yielding 3.05 percent, up 2 basis points from Wednesday, while two-year notes were unchanged to yield 0.26 percent. Treasuries trading volume was 94 percent of its 30-day average with asset managers accounting for half of the day's activity, according to Tradeweb.
Still, investors were unwilling to fully embrace a risk-on trade as worries persisted over the eurozone's debt crisis, with heightened concerns over the ability of some peripheral eurozone sovereigns and banks to fund themselves. A French auction of ultra-long debt on Thursday found firm demand following a recent rise in yields, providing relief that the bloc's stronger sovereigns can still smoothly manage an escalation of the debt crisis for now. The US Treasury Department said on Thursday it will auction $66 billon in coupon-bearing securities: $32 billion in new three-year debt; $21 billion in 10-year notes and $13 billion in 30-year bonds.