By Deborah Levine
Treasury prices advanced Thursday, with yields moving down for
the first time in three sessions, as bond traders played off
evidence of persistently weak employment in the U.S. and
disappointment over stimulus plans in China.
Renewed weakness in the stock market also made itself felt in
the bond market, as investors showed growing concerns about both
leading U.S. automaker General Motors Corp. (GM) and Citigroup ,
once the largest U.S. bank.
"Yesterday was a bad day for Treasurys and today is a good one,"
said William O'Donnell, U.S. government bond strategist at UBS
Securities. He ticked off as factors behind the turnaround the
selling in stocks, GM and Citigroup coming for investor scrutiny,
interest-rate cuts in Europe, and the level of U.S. jobless claims
reported for last week.
In their biggest decline since Feb. 17, 10-year note yields
(UST10Y) fell 15 basis points, or 0.15%, to 2.83%. Bond yields move
inversely to prices.
Two-year note yields (UST2YR) declined 6 basis points to stand
at 0.89%.
Bonds were in favor before the jobless-claims data as European
and U.S. equities declined after China did not announce bigger
stimulus plans, as had been speculated on Wednesday.
Then, the Labor Department said initial claims for jobless
benefits sank by 31,000 to 639,000 last week, possibly because of
adjustments involving the Presidents Day holiday.
Four-week averages tracking initial claims as well as continuing
claims moved higher into record territory, indicating continued
weakness in labor markets, analysts said.
The claims data came a day before the government's closely
watched report on nonfarm payrolls for February. Economists
surveyed by MarketWatch expect the Labor Department to say that the
economy lost 640,000 jobs last month.
Expectations that Europe's economy will shrink and plans by the
Bank of England to support its economy and financial markets sent
overseas bond markets higher, also supporting U.S. debt.
The Bank of England cut its key lending rate nearly to zero and
launched an unprecedented program to buy commercial paper and
government bonds over the next three months.
Separately, the European Central Bank dropped its benchmark
lending rate to the lowest level in its decade-long history.
Jean-Claude Trichet, president of the euro zone's central bank,
said he expects the region's economy to shrink as much as 3.2% this
year.
Treasury pegs $63 billion in supply next week
Also on bond traders' radar screens, the Treasury Department
said it will sell $34 billion in 3-year notes (UST3YR) on Tuesday.
That will be followed the next day by $18 billion in 10-year debt
and $11 billion in 30-year bonds (UST30Y) next Thursday.
Those amounts are all $1 billion more than forecast by Wrightson
ICAP, a research firm specializing in government debt.
Both of the latter long-term debt sales will be reopenings,
meaning the debt sold will carry the same coupon and mature on the
same date as the most recently issued securities. For the
longer-dated bonds, it will be the first reopening a month after
the original issue.