US Treasuries prices fell on Thursday as investors reset bets that yields may increase, a day before Friday's highly anticipated employment report, taking back much of Wednesday's rally that some attributed to short covering. Treasuries posted their best day since last September 2013 on Wednesday as US bond yields were dragged down by rallying German government debt, weak manufacturing data in Europe and Asia and concerns over how quickly the Ebola virus may spread.
Short-covering was cited as the reason for a large part of the move, with many investors positioning for yield increases this quarter as the US economy shows further improvement. "Yesterday there was pretty strong short covering, a lot of people want to be short going into nonfarm payrolls tomorrow," said Jason Rogan, a managing director in Treasuries trading at Guggenheim Securities in New York.
"Some people re-engaged shorts overnight," Rogan said, adding that some fund managers saw the yield drop to the 2.40 percent also as an attractive level to sell bond positions. The benchmark 10-year notes were last down 7/32 in price to yield 2.41 percent, after falling as low as 2.38 percent overnight.
Treasuries posted a 0.48 percent total return on Wednesday, according to a Barclays index. Data on Thursday showing that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week indicated the US labor market might be tightening. Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 287,000 in the week ended September 27, the Labor Department said.
Data Friday is expected to show that employers added 215,000 jobs in September, according to the median estimate of 100 economists polled by Reuters. The European Central Bank left interest rates unchanged on Thursday, shifting focus to an asset-buying plan with which it hopes to revive a flagging euro zone economy and see off the spectre of deflation.
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