Treasurys Get No Boost From Economic Gloom

U.S. Treasurys prices mostly eased Friday despite a bigger-than-expected contraction in November non-farm payrolls as investors were reluctant to buy government debt with yields at the lowest in over 50 years.

Trade was choppy following the payrolls data, which showed 533,000 jobs were lost in November, the steepest monthly fall since December 1974. The unemployment rate rose to 6.7 percent in November—dramatic news that would normally touch off a flurry of safe-haven buying of debt.

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"We're already at (yield) levels we've never seen before. It's just difficult to continue buying Treasurys at these prices," said Kim Rupert, managing director of global fixed-income analysis at Action Economics in San Francisco.

The benchmark 10-year U.S. Treasury note was down 6/32 lower in price for a yield of 2.57 percent, up from 2.56 percent late Thursday.

Benchmark yields, which move inversely to prices, dropped as low as 2.51 percent immediately after release of the jobs data—the lowest in more than five decades.

The two-year Treasury note dipped 1/32 in price for a yield of 0.84 percent, up from 0.82 percent late Thursday, but still well below the Federal Reserve's target of 1 percent for overnight lending between banks.

The recent sharp rally in Treasurys reflected in part bond investors' largely having already priced in a big drop in the jobs numbers, analysts said.

"The (bad) news has been factored in ... sellers are just coming in to take profits," says Jessica Hoversen, fixed-income market analyst at MF Global Research in Chicago.

Traders also said the Treasury is expected to issue a slew of new debt to pay for expensive rescue plans intended to prop up the struggling economy and the flagging financial industry.

All of the new issuance is expected to be a drag on Treasury debt prices.

Still, despite Friday's selling, analysts said the bond rally may be far from over, as lower-risk government debt will remain "the go-to investment" as a safe haven in the spreading global credit crisis.

"Treasurys still look like the only game in town," Rupert said.

The five-year Treasury note declined 5/32 in price for a yield of 1.55 percent, up from 1.52 percent late Thursday.

Bucking Friday's slight downtrend was the 30-year bond, whose price rose 7/32 for a yield of 3.03 percent, down from 3.04 percent late Thursday.

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