US bond yields rise after jobs, factory orders data

US 10-YR
US 30-YR

U.S. Treasurys yields edged higher on Wednesday after data showed U.S. private payrolls were revised higher and factory orders rose sharply in February, supporting expectations of an upbeat nonfarm payrolls report on Friday.

The ADP National Employment Report showed U.S. private employers added 191,000 workers in March, slightly below economists' expectations, but private payrolls for February were adjusted higher to 178,000 from the previously reported 139,000.

The fact that the data did not disappoint pushed yields higher on the day, said Lou Brien, market strategist at DRW Trading in Chicago.

In a separate report, Commerce Department data showed new orders for manufactured goods jumped 1.6 percent in February, the biggest rise since September. While January's orders were revised to show a larger drop, the sharp rises in new orders, as well as factory inventories and shipments in February were positive signs.

Traders are watching Friday's report closely for signs of a better U.S. economic outlook after cold weather hurt U.S. economic data at the start of the year, and for hints on when the Federal Reserve could begin raising interest rates.

U.S. employers are expected to have added 200,000 jobs in March, according to the median estimate of economists polled by Reuters, up from 175,000 in February.

Fed Chair Janet Yellen defended the Fed's stimulative policies on Monday, marking a more dovish turn after suggesting on March 19 that the central bank could raise interest rates earlier than expected.

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said on Wednesday that the Fed could raise interest rates from their current near-zero level in the second half of 2015 if the U.S. economy grows at about 3 percent in annual terms.

The benchmark 10-year Treasury note eased 13/32 in price to yield 2.81 percent, the highest since early March and up from a yield of 2.76 percent late Tuesday. The 30-year Treasury bond price fell 27/32 to yield 3.65 percent, compared with a yield of 3.6 percent late Tuesday.

Medium-term yields also rose. The 5-year Treasury note fell 9/32 in price to yield 1.8 percent, the highest since early January and up from 1.74 percent late Tuesday. Bond yields move inversely to their prices.

The latest rise in Treasuries yields could indicate profit-taking from safe-haven bonds after this year's fall in bond yields, said Jim Sarni, managing principal at Payden & Rygel in Los Angeles, which oversees more than $80 billion in mostly fixed income assets.

The yield on the benchmark 10-year U.S. Treasury note fell 28 basis points to 2.72 percent in the first quarter, marking its first quarterly drop in yield since the second quarter of 2012. The yield on the 30-year Treasury bond fell even further, by 38 basis points to 3.56 percent.

The drop in yields reversed a rise of 138 basis points in the 10-year Treasury yield between May and the end of last year, when the yield was at 3 percent. The rise occurred on fears that a pullback in the Fed's bond-buying program could hurt bond prices.

The Fed bought $2.29 billion in Treasuries maturing between May 2022 and November 2023 on Wednesday as part of its ongoing purchases, which had little impact on Treasuries yields.

On Wall Street, U.S. stocks inched slightly higher on the private payrolls and manufactured goods data. The benchmark Standard & Poor's 500 stock index hit another intraday record and was last up 0.20 percent.