Bonds round-up: Treasuries decline on positive jobs figures

Date: Wednesday 03 Feb 2010

US Treasury bonds have drifted lower as the Treasury revealed plans to sell $81bn of bonds next week and job figures were better than expected.

The number of Americans losing their jobs in the private sector increased by the smallest amount in almost two years last month. Payroll-processing firm Automatic Data Processing said 22,000 private sector jobs disappeared in January, the lowest figure since February 2008. Economists predicted a fall of 30,000.

December’s number was also revised down from the 84,000 reported initially to a final figure of 61,000.

The Treasury said it will auction $40bn in three-year notes on 9 February, $25bn in 10-year notes on 10 February and $16bn in 30-year bonds on 11 February.

Two-year yields have risen nearly two basis points to 0.87% and ten-year yields are three basis points higher at 3.67%.

UK gilts are rising in price on the back of positive consumer confidence figures. Two-year yields are just over one basis point lower at 1.21% and ten-year yields are just under one basis point lower at 3.91%.

Consumer confidence rose in January as signs that the UK economy is recovering boosted sentiment, according to a Nationwide Building Society survey. The Nationwide’s survey of consumer confidence recorded a three point increase to 73 in January, nearly double the reading of 39 recorded in January 2009 when the UK was in the depths of the economic crisis.

However, confidence on spending fell, with the percentage of those believing now is a good time to make a major purchase falling from 35% in December to 32% in January.

The CIPS/Markit services Purchasing Managers’ Index (PMI) dropped to 54.5 in January, down from 56.8 the month before and short of the 56.5 expected by economists. This is probably due to the snow during the month. A read of over 50 indicates expansion.

Incoming new business tumbled to a five-month low, possibly linked to the VAT hike at the start of the year.

German bund prices were in decline. Two-year yields were less than one basis point higher at 1.13% and ten-year yields were two basis points higher at 3.22%.

The European Commission said it ‘fully supports’ Greece’s plan to cut its budget deficit below 3% of GDP by the end of 2012, adding that it will monitor the Greek government ‘very closely’.

Under the plan, Greece aims to cut its budget deficit from nearly 13% of GDP. The European Union’s stability and growth pact states that all 16 member of the eurozone must limit their budget deficit to 3% of gross national product while public debt level must not exceed 60%.

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