Treasuries rose as a private report showed the U.S. added fewer jobs than forecast in March, reinforcing concern about the strength of the economic recovery as the Federal Reserve moves closer to raising rates.
Ten-year note yields fell to an almost two-month low as the report raised questions about the momentum of the labor market, which has been the driver of the economy’s expansion that began almost six years ago. Demand for Treasuries was also boosted by their relative value, as U.S. yields are higher than 19 developed economies including the U.K., Norway and Spain.
“Everything is pointing to lower rates,” said Thomas di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets in New York. “There’s a fairly good chance at some point between now and Friday the 10-year could trade closer to 1.80 with everything that’s going on in Europe, and with 10-year gilts making a new low.”
The 10-year yield dropped seven basis points, or 0.07 percentage point, to 1.85 percent as of 5 p.m. in New York, according to Bloomberg Bond Trader data. The price of the benchmark 2 percent note due in February 2025 rose 19/32, or $5.94 per $1,000 face amount, to 101 9/32. The yield touched the lowest level since Feb. 6.
Treasuries trading has slowed since the Fed meeting last month. The volume traded through ICAP Plc, the largest inter-dealer broker of U.S. government debt, reached $431 billion on March 18 and has averaged $283 billion a day since then.
“Volumes don’t seem that strong, so I don’t think it’s a high-conviction move,” said Natan Magid, a fixed-income strategist at Bank of Montreal, one of 22 primary dealers that trade with the central bank.
The 10-year yield dropped 25 basis points during the first quarter. The average forecast from economists surveyed by Bloomberg at the end of 2014 was for an increase to 2.55 percent.
Fed policy makers signaled last month they won’t rush to raise interest rates while weighing below-target price gains in an economy that pushed the unemployment down to 5.5 percent from 6.6 percent a year ago.
Companies added 189,000 workers to payrolls last month, figures from Roseland, New Jersey-based ADP Research Institute showed Wednesday. The forecast was for a gain of 225,000. U.S. nonfarm payrolls grew by 245,000 last month, according to the median estimate in a Bloomberg survey of economists before the April 3 Labor Department report.
The economy has averaged 275,000 added jobs during the prior 12 months. That contrasts with retail sales data, which has declined for three consecutive months.
“We’ve had pretty good employment numbers, but at the same time the other data has been a little bit softer,” said John Briggs, a U.S. government-bond strategist at RBS Securities Inc. in Stamford, Connecticut, a primary dealer. “It’s not like things have been falling off a cliff, but there has been a slow-down in a lot of other pieces of news.”
The yields on German two-, 10- and 30-year debt dropped to all-time lows, as the European Central Bank buys bonds to head off deflation and prop up economic growth in the euro region.
Germany’s finance agency sold notes due in April 2020 at an auction yield of minus 0.10 percent, down from minus 0.08 percent at a previous sale on Feb. 25, which was the first time the nation allocated five-year securities at a yield below zero.
A negative yield means investors buying the securities will get less back when the debt matures than they paid. The yield on about a quarter of the euro-area securities is less than zero.