Most US Treasury debt prices rose on Friday after the government said the US unemployment rate jumped in October, but the prospect of new supply next week limited gains. Thirty-year bonds were particularly leashed, challenged by the prospect of $16 billion in new supply next Thursday.
The Treasury will sell a total of $81 billion of three-, 10- and 30-year securities next week. Nonetheless, the Labour Department's report that US employers cut a larger-than-expected 190,000 jobs in October and the unemployment rate rose to 10.2 percent lifted prices of most US government securities.
US benchmark 10-year Treasury notes traded 5/32 higher in price to yield 3.51 percent, down from 3.53 percent late on Thursday. Investors said they favoured shorter-dated securities over longer-term bonds since the Fed's statement on Wednesday at the end of its policy meeting "was widely interpreted as being dovish and today's payrolls report reinforced the idea that the Fed won't move soon; so we've seen a rally in the short end," said Stephen Stanley, chief economist at RBS Securities in Stamford, Connecticut.
Longer-dated bonds remained out of favour due to the prospect of looming supply as well as worries that inflation could become a problem if the Fed waits too long to raise rates. Inflation erodes the value of Treasuries over time, making longer-dated debt more susceptible to inflation fears.
Earlier this week, the Treasury said it will expand sales of longer-dated notes and bonds while paying down bills, which mature in a year or less. Analysts worry the global appetite for massive doses of new US debt could eventually wane. That left the 30-year bond to trade flat in price to yield 4.40 percent, while two-year notes traded 2/32 higher in price to yield 0.86 percent from 0.89 percent late on Thursday.
The two-/10-year yield curve remained at its steepest since late July with short-term rates anchored by the Fed's commitment to keep rates low and long-term yields coming under upward pressure from imminent supply and inflation concerns. Treasuries' gains were justifiable, according to William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.