Treasuries gained, pushing 10-year note yields to the lowest level in almost four months, as a weaker-than-expected jobs report added to speculation that growth in the world’s biggest economy is slowing.
Yields on the benchmark note dropped the most in a week since August after payrolls grew by 88,000 workers last month, the least in nine months, even as the unemployment rate declined, the Labor Department said. Yields have fallen as gauges of company hiring and U.S. services industries trailed estimates. Hedge-fund managers and other large speculators increased their net-long position in five-year note futures to a more than six-month high.
“It really puts the trajectory of the economy in question,” said William Larkin, a fixed-income money manager who helps oversee $500 million at Cabot Money Management Inc. “It makes Treasuries very attractive. It puts the Fed’s statements at an elevated level -- the next employment report is going to be highly sensitive.”
Ten-year note yields fell five basis points, or 0.05 percentage point, to 1.71 percent at 5 p.m. New York time, according to Bloomberg Bond Trader data. They touched 1.68 percent, the lowest level since Dec. 12. The price of the 2 percent note maturing in February 2023 rose 14/32, or $4.38 per $1,000 face value, to 102 1/2.
Speculative long positions in the five-year note, or bets prices will rise, outnumbered short positions by 157,564 contracts on the Chicago Board of Trade in the week ending April 2, rising 24 percent from a week earlier, according to U.S. Commodity Futures Trading Commission data. That’s the highest since Sept. 21.
Yields on five-year debt fell one basis point to 0.7 percent.
Net-long positions in 10-year note futures also rose, outnumbering short positions by 110,692 contracts, the most since the week ending March 1.
The 10-year yield traded below its 200-day moving average of 1.74 percent for the first time since Jan. 2 after closing below its 100-day moving average of 1.83 percent on April 3 for the first time since Dec. 11. Moving averages are indicators of momentum.
The yield on the 30-year bond touched 2.84 percent, the lowest level since Dec. 12. It traded below its 200-day moving average of 2.9 percent for the first time this year.
The difference between the yields on two-year and 10-year notes, called the yield curve, narrowed to 1.48 percentage points, the lowest level since Dec. 31. It dropped from a 2013 high of 1.82 percentage points reached on March 8, the date of the last payrolls report.
The 14-day relative strength index for 10-year note yields indicated rates may not fall much further. The index touched 27.8, below the level of 30 indicating a reversal of direction may be imminent.
“It’s not going to alter the Fed’s approach,” Richard Schlanger, a vice president at Pioneer Investments in Boston and a member of a group managing $20 billion in fixed-income securities, said of the jobs report. “I think they’re very concerned, obviously, with the decline in the participation rate.”
The unemployment rate, derived from a separate survey of households, dropped to 7.6 percent versus a forecast to hold at 7.7 percent, according to the Bloomberg survey median. The figure, the lowest since December 2008, reflected a 496,000 decline in the size of the labor force.
The growth in payrolls followed a revised 268,000 gain in February that was higher than first estimated, Labor Department figures showed. The median forecast of 87 economists surveyed by Bloomberg projected an advance of 190,000.
The economy added an average of 179,000 people a month to nonfarm payrolls in 2011 and 2012, Labor Department data show. The jobless rate had stayed above 8 percent since February 2009 until it broke the trend in September.
The U.S. central bank has been buying $85 billion of bonds each month since the start of the year, $45 billion in Treasuries and $40 billion of mortgage debt, in an effort to hold down borrowing costs and encourage economic growth. It has kept its benchmark interest-rate target for overnight lending between banks in a range of zero to 0.25 percent since 2008 to support the economy.
Policy makers reiterated March 20 the rate will stay near zero as long as the unemployment rate is above 6.5 percent and inflation is projected to be no more than 2.5 percent. They said the purchases will continue until employment improves.
Swaps traders have pushed back expectations for the Fed first interest-rate increase since adopting extraordinary monetary stimulus to about November 2015 after slower jobs growth in March. Yesterday, OIS showed July 2015 as the likely date for a rate increase.
The central bank’s next policy meeting is scheduled for April 30-May 1.
The yield on Treasury 10-year notes fell earlier this week as investors sought U.S. debt as policy makers in Japan and the euro zone promised more easing.
New Bank of Japan Governor Haruhiko Kuroda said yesterday the central bank would double its monthly asset purchases in a bid to encourage inflation, while European Central Bank President Mario Draghi said the ECB stands ready to cut interest rates and consider additional measures to boost growth as the region’s sovereign-debt crisis enters its fourth year.