US bond prices fall

US Treasury prices fell on Monday in volatile trading as oil prices surged in the wake of a strong February US jobs report, reducing demand for safe-haven government debt ahead of a European Central Bank meeting later in the week. Momentum from Friday's employment report, which showed nonfarm payrolls added a much larger-than-expected 242,000 jobs in February, continued to put pressure on safe-haven US government debt.
"The reaction in markets is still based on the better-than-expected jobs data from Friday, which pushed back expectations for the Fed to raise rates," said Cheng Chen, interest rates strategist at TD Securities in New York. "More investors now expect the next hike will come sooner than later." Additionally, Brent crude rose to a 2016 peak above $40 a barrel as investors rotated more assets into raw materials.
Treasuries have largely followed moves in crude oil this year as tumbling oil prices have stoked concerns about slowing global growth and the efficacy of central bank policies meant to spur investment. "Beyond Friday's surprisingly positive number, oil is surging, industrial commodities are rallying and there's definitely anticipation about an ECB move later in the week, adding to the selling off today," said Lou Brien, a market strategist at DRW Trading in Chicago.
The ECB is expected to push interest rates further into negative territory and make an adjustment to its bond-buying program. But after the bank disappointed many in markets in December, traders are wary of making major bets prior to the meeting. "Markets are looking to see how much (ECB chief Mario) Draghi will deliver, so trading will be modest leading into the meeting," said Chen. The Treasury Department will sell $24 billion of 3-year notes on Tuesday, $20 billion of 10-year notes on Wednesday and $12 billion of 30-year bonds on Thursday.
The Federal Open Market Committee, the Fed's policy-setting group, will next meet on March 15-16. The benchmark 10-year note's yield rose to 1.920 percent, its highest in just over a month. It was last down 5/32 in price to yield 1.900 percent, up from 1.883 percent late on Friday. The 30-year bond was last up 1/32 in price to yield 2.701 percent, down from 2.703 percent late on Friday.