US Treasuries turn flat, mortgage-related sales cited
By Ellen Freilich
NEW YORK, March 30 (Reuters) - Treasuries prices erased small gains Tuesday, pressured by mortgage-related selling and a better than expected U.S. consumer confidence report.
A 20-basis point rise in 10-year yields over the last week has prompted mortgage-backed securities investors to anticipate fewer mortgage refinancings, analysts said. To adjust their portfolios to their benchmark durations, they sold Treasuries.
Corporate supply also weighed a bit, traders said.
Earlier, Treasuries pulled back from session highs on a slightly stronger than expected March U.S. consumer confidence report.
The Conference Board's measure of consumer confidence eased only slightly, to 88.3 in March from an upwardly revised 88.5 in February. The market had looked for a dip to 86.5 from the originally reported 87.3. Results for the previous three months were all revised, in part because of a programming error.
Perhaps just as important given the market's obsession with Friday's March payrolls figures, the measure of consumers saying jobs were hard to get edged up to 30.0 percent from a downwardly revised 28.9 percent in February.
That could give pause to those calling for an upside surprise in payrolls and limited the pullback in Treasuries.
Economists, however, observed that the confidence report paled in importance beside labor market data due later this week.
"The more significant (weekly jobless) data will be coming in on Thursday and (the monthly employment data) on Friday," said Henry Willmore, chief U.S. economist at Barclays Capital.
The 10-year note <US10YT=RR>, up 6/32 near midday, was flat at 100-28/32 in mid-afternoon trade, its yield at 3.89 percent, unchanged from late on Monday. Yields hit an eight-month low around 3.65 percent earlier this month before climbing as high as 3.92 percent on Monday.
Five-year notes <US5YT=RR> were also flat, after being up 4/32 earlier, their yields at 2.84, unchanged from Monday.
The 30-year <US30YT=RR> bond was off 1/32, having erased an earlier gain. Its yield was 4.81 percent, unchanged from Monday's level.
At the very short end, yields on two-year notes <US2YT=RR> were unchanged from Monday at 1.62 percent.
Many in the market are convinced that the Federal Reserve will not raise U.S. interest rates unless and until they see convincing proof of a revival in employment.
For his part, Fed Board Governor Ben Bernanke sounded cautiously optimistic on the jobs outlook, saying he expected steady gains in employment over the rest of the year.
In a speech on trade and jobs, Bernanke pointed to "astonishing" gains in business productivity as the main reason for labor market weakness and argued that such growth would likely prove unsustainable.
This has been a standard refrain from the Fed for some months now, and yet payrolls have yet to show any sign of a lasting recovery.
Fed Bank of Atlanta President Jack Guynn sounded more hawkish on monetary policy, arguing that there were dangers in keeping interest rates low for too long and that rates had to rise to a more neutral level eventually.
Bond bulls took comfort in the fact that Guynn is not a voting member of the Fed's policy-making committee this year, and his comments had little impact on Treasuries.
Still, tensions are building steadily ahead of Friday's payrolls report amid suggestions jobs will finally show a revival after four months of disappointing weakness.
Median forecasts in a Reuters survey were for only a modest gain of 103,000 in March payrolls, but some analysts had bolder forecasts. Mark Vitner, senior economist at Wachovia, is predicting a rise of 225,000. This would be the biggest gain since May 2000.
"The single most important factor in our forecast has been the improvement in corporate pricing power," said Vitner, whose model predicts employment growth based on the gap between revenue growth and the increase in wage and benefit costs.
"Our model indicates that the conditions for stronger job growth are now securely in place, which is something that has not been true for most of this recovery," he argued.
More News:
3-30-04 Fear of lurking inflation raises rate questions
3-30-04 Bernanke says too low inflation can hurt economy
3-30-04 Gasoline Prices Sting Chain Store Sales
3-30-04 Guynn: Fed Rates Must Go Back to Neutral
3-30-04 High-tech outsourcing led to US job gains of 90,000 in 2003
3-30-04 IRS going after 'alarming' cheaters
3-30-04 Jobs data looms over confidence
3-30-04 5 NYSE Firms to Pay to Settle SEC Charges
3-30-04 Senate Panel Approves Bush's HUD Nominee
3-30-04 IRS nominee: Amount of unpaid US taxes unclear
3-30-04 Treasury Secretary John Snow says outsourcing can help economy
3-30-04 U.S. consumer confidence up for 2nd week
3-30-04 US lenders urge federal law on abusive lending
3-30-04 U.S. March Consumer Confidence Edges Lower
Great Mortgage Articles:
Homeowner's Insurance | Debt Overload | Credit Cards | Successful Remodeling | Managing Mortgages | Refinancing Loans | Home Improvement | Moving Tips | Homeownership Mishaps | Best Appraisals | Clean Your Credit | Real Estate InvestmentsApply Online | About Us | Contact Us | Free Mortgage Quotes | Our Programs | Home Equity Loans
Second Mortgages | Refinance Mortgage | FAQ | Colleagues
