US Treasury debt prices fell sharply on Friday as investors looked beyond a dismal employment report to again focus on vast upcoming issuance. Hopes for some sort of moderation in the economy's retrenchment also began driving traders into riskier assets, extending a rally in equities to the detriment of bonds.
Such a reversal of fortunes helped push benchmark 10-year notes down a full point, driving yields up 12 basis points to 2.90 percent. "The bond market is getting out of the way of the new issuance calendar but it's also having to wrestle with the fact that risk appetites are improving," said Bob DiClemente, economist at Citigroup.
US employers axed 663,000 jobs in March and there were sharp upward revisions to the prior two months readings. The unemployment rate jumped to 8.5 perccent, the highest in 25 years. But traders were more concerned about supply than jobs data, which were seen as backward looking.
Treasury will sell three- and 10-year notes next week, in addition to a $6 billion reopened 10-year inflation-protected bonds and a slew of bills. The exact size of the regular note sales will not be known until Monday, but last month it totalled $34 billion in three-year notes and reopened 10-year notes amounted to $18 billion.
Apart from the jobs report, a survey from the Institute for Supply Management on the US services sector also showed further deterioration, posting a surprise drop to 40.8. It was below the 50 threshold for a sixth straight month, meaning the sector continues to contract.
But the momentum of trade was decidedly negative for Treasuries, and the 30-year bond slumped 1-18/32 for a yield of 3.69 percent. "The market is trying to set up for the upcoming auctions," said Ron D'Vari, chief executive officer of NewOak Capital in New York.