Long-term bonds drift higher on jobless claims data


Longer-dated U.S. Treasurys yields edged lower on Thursday after data showed U.S. initial jobless claims rose more than expected last week, causing some jitters ahead of the key monthly nonfarm payrolls report due Friday.

The Labor Department said initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 326,000 in the week ended March 29, exceeding economists' expectations of a rise to 317,000.

The data worried investors ahead of the government's closely-watched employment report, which economists expect will show nonfarm payrolls increased by 200,000 jobs in March after rising by 175,000 in February. The unemployment rate is seen falling one-tenth of a percentage point to 6.6 percent.

A 200,000 increase in nonfarm payrolls would be the highest in four months.

Separately on Thursday, the Commerce Department said the trade gap increased 7.7 percent to $42.3 billion in February, the largest gap since September, as exports fell to their lowest level in five months. The data contributed to the slight dip in the long-dated bond yields.

The jobless claims and trade balance data pushed longer-dated bond yields slightly lower, said Vishal Khanduja, fixed income portfolio manager at Calvert Investments in Bethesda, Maryland.

The 30-year Treasury bond rose 15/32 in price to yield 3.62 percent, compared to a yield of 3.65 percent late on Wednesday. The benchmark 10-year U.S. Treasury note gained 4/32 in price to yield 2.79 percent.

Thursday's dip in long-term bond yields marked a turn in sentiment from the past week. Through Wednesday, the 30-year Treasury yield had risen about 14 basis points since March 27, partly on upbeat economic data and expectations that Friday's jobs report would be strong.

"The market had basically factored in a pretty good report, and there was a rethinking of that view," said Anthony Valeri, fixed income strategist at Boston-based LPL Financial.

Long-dated Treasurys yields edged lower despite data showing growth in the U.S. services sector accelerated in March. The Institute for Supply Management said its services sector index rose to 53.1 last month, slightly under expectations for a read of 53.5 but comfortably ahead of the February read of 51.6.

"There were probably investors looking for a stronger bounce back from February," Valeri said of the muted impact on Treasurys yields.

Traders will be watching Friday's employment report for signs of a better economic outlook after cold weather put a chill on the economy at the start of the year, and also for hints on the likely path of the U.S. Federal Reserve's monetary policies. On March 19, Fed Chair Janet Yellen suggested the central bank could raise interest rates earlier than expected.

The Fed bought $1.08 billion in Treasurys maturing between August 2040 and February 2043 on Thursday as part of its ongoing purchases, which had a little impact on Treasurys yields.

Stocks on Wall Street fell, led by a sharp drop in biotech and momentum stocks. The benchmark Standard & Poor's 500 index was last down 0.12 percent. The decline came after the S&P 500 and the Dow Jones industrial average earlier hit record intraday highs.

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