US government bond prices rose modestly on Monday as strength following weak January jobs data spilled over from last week. Dealers looked past unexpectedly robust figures on the services sector from the Institute for Supply Management, focusing instead on a decline in the labour component that confirmed the slowing reported in Friday's employment data.
"A strong gain in the ISM non-manufacturing activity index was tempered by weaker details," said Haseeb Ahmed, economist at J.P. Morgan. Gains in Treasuries were relatively subdued, however, with the prospect of steady monetary policy from the Federal Reserve keeping yields stuck in a range.
Benchmark 10-year notes climbed 4/32 in price and were offering a yield of 4.81 percent, down from 4.83 percent Friday, but still 40 basis points above a December trough.
Since then, investors have drastically reassessed their views on the official interest-rate outlook, largely eliminating any rate cut from their near-term forecast. Then again, the job market's weakness and relatively tame wage gains seemed to suggest the Fed will not need to resume hiking rates, either.
All of which is likely to relegate bond yields to a narrow band for now, although some traders believe more selling may be in store ahead of this week's refunding auctions.
True, strong tax receipts have seriously reduced the amount of borrowing that goes on in Treasury's quarterly debt bonanzas - the latest adds up to $38 billion - about $10 billion less than a year ago. Yet worries about spotty foreign demand could lead to some pre-sale cheapening of the issues, to entice buyers.
Whatever the outcome, there was no economic data on the immediate horizon to dissuade bond investors of their basic underlying assumption: The Fed is on hold for the foreseeable future. That premise made for some dull market action, with five-year notes up just 2/32 and yielding 4.80 percent.
The two-year note's yield eased a basis point to 4.93 percent, with the price up just 1/32. The 30-year bond climbed 6/32 in price to yield 4.91 percent.
Comments
Comments are closed.