US Treasury debt prices fall

US Treasury debt prices fell on Friday after October jobs data that was dismal but not as dire as pessimists had feared, with firmness in the stock market also taking the shine off safe-haven government bonds. Investors had already priced into bonds their expectations for a very weak number, and when their worst expectations were not met, they sold debt holdings.
"Treasuries were priced for Armageddon and we didn't get Armageddon," said Kevin Flanagan, fixed income strategist at Morgan Stanley in New York. Bond prices were also being hit by the climbing stock market, and by overhanging concerns about a spate of new debt supply that investors fear will seriously dilute the market.
Benchmark 10-year Treasury notes were trading 18/32 lower in price for a yield of 3.76 percent from 3.69 percent late on Thursday, while 2-year notes were 3/32 lower for a yield of 1.33 percent from 1.28 percent. The Labour Department said US employers cut payrolls by 240,000 in October, marking the tenth straight month of contraction in jobs, while September was revised to the biggest monthly loss in jobs in nearly seven years at 284,000.
While the October number was worse than the median forecast of a loss of 200,000 from analysts polled by Reuters, it was still not as terrible as some had expected. Goldman Sachs had predicted job losses of 300,000. "Although the consensus was down 200,000 for non-farm payrolls, at the back of their minds everyone was looking for a weaker number," said Sean Simko, fixed income portfolio manager at SEI in Oaks, Pennsylvania.
Supply concerns also continued to plague the bond market. The Treasury said this week it will sell $55 billion of 3-year notes, 10-year notes and will sell reopened 30-year bonds next week to meet its quarterly refunding needs.
The amount to be auctioned is significantly above the $18 billion refunding in November of last year. The government needs the additional funds to supply various programs intended to revive the struggling financial industry. Stocks also gained, with investors turning to higher-risk equities and away from the lower-risk of government debt.
Five-year Treasury notes traded 12/32 lower in price for a yield of 2.54 percent from 2.46 percent late on Thursday, while the 30-year bond was 17/32 lower for a yield of 4.23 percent from 4.20 percent.