By Min Zeng
Treasury bonds clawed back earlier price losses on Wednesday
following a disappointing U.S. employment report.
In recent trading, the benchmark 10-year note was flat, yielding
2.287%, according to Tradeweb. Yields rise as prices fall.
Private payrolls in the U.S. rose by 208,000 jobs in November,
according to the national employment report compiled by payroll
processor Automatic Data Processing Inc. and forecasting firm
Moody's Analytics.
Economists had expected 223,000 jobs.
The ADP report hasn't proved to be an accurate predictor for
nonfarm payrolls, a broader gauge of U.S. employment and a main
data point closely monitored by the Federal Reserve in setting
interest rates. Economists expect Friday's nonfarm payrolls report
to show 230,000 new jobs last month following a gain of 214,000 in
October.
The 10-year Treasury yield has fallen from 3% at the start of
the year, even as the U.S. economy has gained traction.
While the Fed ended its monthly bond buying in October, the
European Central Bank and the Bank of Japan have stepped up
monetary stimulus, and the liquidity has sent global bond yields
lower.
U.S. bonds offer higher yields compared with most of the
developed world. A rising dollar has increased the allure of U.S.
assets to foreign buyers.
The interest rate futures markets indicate that investors don't
expect the Fed to raise rates until the second half of 2015. But
some traders say the Fed could raise rates sooner than investors
expect if the economy accelerates or if inflation rears its ugly
head, which would push down Treasury prices and send yields even
higher.
Fed Vice Chairman Stanley Fischer on Tuesday said the central
bank is getting closer to dropping its pledge of keeping interest
rates low for a "considerable time," though he said the
rate-increase timing hinges on upcoming economic data.
Write to Min Zeng at min.zeng@wsj.com
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