Treasuries Slip for First Time in 7 Days as China Concern Easesby and
Investors looking ahead to payrolls after ADP beats estimates
Ten-year yields still set for 1st weekly drop in a month
Treasury 10-year notes fell for the first time in seven days as China’s currency fixing Friday suggested the nation’s measures to spur the economy this week may be starting to have the desired effect, curbing demand for the safest assets.
U.S. government securities declined as China set its rate for the yuan little changed from Thursday’s level. The nation’s effort to guide its currency lower earlier this week sparked speculation the economy was slowing enough to prompt officials to take emergency steps. Treasuries also dropped before a monthly U.S. employment report Friday that economists predict will show earnings rose in December, which comes two days after ADP Research Institute said companies boosted hiring the most in a year.
“Risk aversion seems a bit lower,” said Ralf Umlauf, head of floor research at Helaba Landesbank Hessen-Thueringen in Frankfurt. Payrolls “should be quite good maybe with a potential for a positive surprise. There should be a little bit of a burden on the Treasury market, and yields should rise a little bit,” he said.
The U.S. 10-year note yield climbed two basis points, or 0.02 percentage point, to 2.17 percent as of 6:45 a.m. in New York, according to Bloomberg Bond Trader data. The price of the 2.25 percent note due in November 2025 fell 6/32, or $1.88 per $1,000 face amount, to 100 23/32. The yield declined 10 basis points this week, the first time it has fallen since the five days through Dec. 11.
China set its reference rate little changed after an eight-day run of reductions that sent shockwaves through global financial markets. As stability returned to equities Friday, China’s CSI 300 Index of shares gained 2 percent.
China may also be selling Treasuries to raise money as part of its efforts to stabilize its markets, said Yoshiyuki Suzuki, head of fixed income in Tokyo at Fukoku Mutual Life Insurance, which has $55.9 billion in assets. The nation’s foreign reserves shrank last year for the first time since 1992, the People’s Bank of China said Thursday.
U.S. average hourly earnings advanced 2.7 percent last month from a year earlier, after gaining 2.3 percent in November, based on a Bloomberg survey of economists. Employers added 200,000 jobs in the month, according to a separate survey. The 257,000 increase in private employment reported by ADP on Dec. 6 exceeded the most optimistic forecast of economists surveyed by Bloomberg. A day later, government data showed fewer Americans filed applications for unemployment benefits last week.
“Payrolls should be firm,” said Kei Katayama, a bond manager in Tokyo for Daiwa SB Investments, which oversees $49.2 billion. “It could give us a dip to buy.”