Treasuries were little changed before the U.S. government releases a delayed labor-market report that economists predict will show employers added the most jobs since April.
Benchmark 10-year yields climbed from the lowest level since July yesterday before separate data this week forecast to show durable goods orders increased in September. The numbers have been delayed by a 16-day government shutdown that Standard & Poor’s estimated will shave at least 0.6 percent off fourth-quarter growth. Fiscal strife in Washington will probably delay the central bank from slowing monthly bond purchases, Federal Reserve Bank of Chicago President Charles Evans said yesterday.
“Payrolls are very much in focus today,” said Niels From, chief analyst at Nordea Bank AB in Copenhagen. “If there is a good number the market will be cautious to read too much into it as it was before the shutdown. If we see some weakness in the number in September, it confirms we could be in for some economic softness after a run of good data. Our year-end forecast for the 10-year yield is 2.55 percent.”
The 10-year yield was at 2.60 percent at 7:04 a.m. New York time, according to Bloomberg Bond Trader data. The price of the 2.5 percent note due in August 2023 was 99 1/8. The yield fell to 2.54 percent on Oct. 18, the lowest since July 24. It rose two basis points, or 0.02 percentage point, yesterday.
Employers added 180,000 workers in September after hiring 169,000 in August, according to the median estimate of economists surveyed by Bloomberg News before the Bureau of Labor Statistics releases the data. The report was originally scheduled for Oct. 4 and will be released today at 8:30 a.m. in Washington.
Durable goods orders rose 2.2 percent after gaining 0.1 percent in August, a separate Bloomberg survey showed before the Oct. 25 report.
Economists predict the Fed will maintain bond purchases at $85 billion a month until March, according to a Bloomberg survey conducted Oct. 17-18. They forecast the government closure cut growth by 0.3 percentage point this quarter.
Before the shutdown, most policy makers said the central bank would probably reduce bond purchases this year. The Fed’s next two policy meetings are Oct. 29-30 and Dec. 17-18.
An October decision to taper would be “a tough one” as “we haven’t had a lot of data” since the September meeting, Chicago Fed’s Evans said in a CNBC interview. “It’s very difficult to feel confident in December given that we’re going to repeat part of what just took place in Washington.”
The shutdown, which took place as Republicans and Democrats clashed over passing a budget and lifting the nation’s borrowing limit, was resolved last week when President Barack Obama signed legislation opening the government until Jan. 15 and suspending the debt ceiling through Feb. 7.
The U.S is scheduled to sell $35 billion of one-month bills today. Investors submitted bids for 4.03 times the $35 billion of three-month bills the Treasury auctioned yesterday, up from 3.13 times at the previous sale on Oct. 15. That’s below the average bid-to-cover ratio of 4.64 at the 40 bill sales this year before the Oct. 1 shutdown, data compiled by Bloomberg show.
Treasury trading volume at ICAP Plc, the largest inter-dealer broker of U.S. government debt, dropped to $210.6 billion yesterday from $249.2 billion on Oct. 18. The average this year is $316.3 billion.
Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE index was 71.47 basis points yesterday, after falling to 70.09 on Oct. 17, the lowest level since May 24. It climbed 114.19 on Sept. 5, the highest since July.