Mortgage News You Can Use
Treasuries Up, Job Famine Keep Rates Lean
Fri February 6, 2004 10:19 AM ET
By Wayne Cole
NEW YORK (Reuters) - Treasury prices climbed on Friday as crucial U.S. payrolls figures proved soft for the third month in a row, bolstering hopes the Federal Reserve will be patient before raising interest rates.
Still, the market's gains were relatively modest as speculators had been reluctant to short bonds too aggressively, remembering the pain caused by December's soft job numbers.
"It's all very modest -- the numbers and the reaction," noted James Glassman, senior economist at J.P. Morgan. "What we can take from the report, is that the Fed should be in no rush to tighten."
The market seemed to agree and two-year notes (US2YT=RR: Quote , Profile , Research ) , the most sensitive to thinking on official rates, jumped 5/32 in price, dragging yields down to 1.75 percent from 1.84 percent late on Thursday.
Likewise, Eurodollar futures (0#ED:: Quote , Profile , Research ) climbed across the board as the market trimmed the risk of rate hikes this year.
Having spent the last few weeks anguishing over possible outcomes for the jobs report, the actual numbers were something of an anti-climax.
Nonfarm payrolls rose 112,000 in January, below forecasts of a 150,000 gain and well short of market whispers of 200,000 or more. December was revised up slightly to a gain of 16,000 but that was a lot less than many economists had hoped for.
After revisions, job growth has run at only 73,000 a month since turning positive September, well below the 150,000 or so needed to absorb the natural expansion of the labor force.
The size of the labor force has actually been shrinking as discouraged workers give up looking for a job. Thus the unemployment rate dipped to a two-year low of 5.6 percent in January from 5.7 percent the month before.
"When strange things are going on with the labor force the unemployment rate becomes less important and we assume the Fed is far more focused on the payrolls report," said J.P. Morgan's Glassman.
"It would take many months of sustained strength in payrolls for the Fed to even consider hiking, which is why we don't see a move until late this year, or maybe 2005," he added.
That view offered comfort to longer-dated debt and the benchmark 10-year note rose 16/32 in price, taking yields down to 4.11 percent from 4.18 percent late on Thursday.
The five-year note (US5YT=RR: Quote , Profile , Research ) added 13/32, compressing yields to 3.10 percent from 3.19 percent. Thirty-year bonds (US30YT=RR: Quote , Profile , Research ) climbed 21/32, taking their yield to 4.93 percent from 4.99 percent.
Traders noted the market had underlying support from foreign central banks who were still buying up Treasuries as part of their efforts to restrain the dollar's fall and slow the appreciation of their own currencies.
Data from the Fed out late Thursday showed its custody holdings of Treasuries held on behalf of overseas central banks climbed $9.62 billion in the week to Wednesday, reaching a record $894.19 billion.
Much of that money was thought to have come from the Bank of Japan which has been intervening heavily in recent weeks and months to prevent an export-damaging rise in the yen.
Continue with:
Home Equity Loans Rates Online Refinancing Loan 125%
Mortgage Refinance - Lowest Mortgage Rates - |
