US Treasury debt prices slipped on Friday, after data showed a loss of 651,000 non-farm payroll jobs in February, close to economists consensus forecasts but still underscoring that the worst recession in decades remained in full force. Treasuries traders kept a close eye on US stock index futures, which turned higher after the jobs data, curbing the safe haven bid for government bonds.
The benchmark 10-year Treasury notes price, which moves inversely to its yield, slipped 8/32 for a yield of 2.84 percent, versus 2.81 percent late Thursday. The yield has rebounded from a five-decade low of 2.04 percent in mid-December, which happened amid investors scramble for safer assets during the global market panic of 2008.
Fridays monthly jobs report underscored the persistently dismal state of the labour market and economy, as the jobless rate rose to 8.1 percent, the highest in 25 years.
"Given how grim things are the bid will still remain for Treasuries and we will have to take our cue from whether stocks go on sliding lower. The slight initial selloff in Treasuries is more of an adjustment," said George Goncalves, chief Treasury-TIPS and agency strategist with Morgan Stanley in New York.
Amid the worst US recession in decades and the biggest global credit crisis since the Great Depression, labour market conditions have deteriorated markedly. Analysts remain concerned that a spiral of falling consumer spending and ebbing industrial activity could yet trigger more job losses and put even more strain on already loss-burdened banks.
That grim economic backdrop and investors desire to shelter in the comparative safety of government securities should still lend some support to Treasury prices, which move inversely to their yields, analysts said.
However, the huge costs of rescue efforts for the financial system are forcing the US government to ramp up debt issuance by some $2.5 trillion this year ontop of the $6 trillion Treasury market according to analysts estimates, raising the risk that Treasury yields may spike sharply higher. The two-year Treasury notes price slipped 4/32 for a yield of 0.95 percent, versus 0.89 percent late Thursday. Compared with earlier whisper numbers, the jobs report could have been far more dire, analysts said.
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