|
Treasurys hold steady
|
 |
January 7, 2000: 3:50 p.m. ET
Jobs report, though strong, does not hurt the oversold bond market
|
NEW YORK (CNNfn) - Treasury bonds ended little changed Friday after the government’s monthly jobs report failed to confirm the market’s worst fears of rising inflation.
Labor Department figures showed a tight job market and rising wages -- typically negatives for the inflation sensitive bond market. But analysts said bonds, which sold off sharply ahead of the news, had already factored in the report’s strength.
"It’s a strong report but I actually do not think it was that much stronger than the markets were already braced for,” said John Ryding, economist at Bear Stearns. "So, I think in the end you can score this report neutral and the market was already braced for a quarter-point (interest) rate hike anyway on Feb. 2.”
Just before 3:20 p.m. ET, the price of the benchmark 30-year bond rose 2/32 to 94-15/32. Its yield held steady at 6.55 percent.
In the week’s most closely watched economic indicator, American’s average hourly earnings jumped 0.6 percent last month, twice forecasts, and the jobs market remains tight. The unemployment rate remained near a 30-year low of 4.1 percent and a lofty 315,000 non-farm jobs were added to the economy.
While the number’s are strong and don’t change the widely held belief that the Federal Reserve will launch a series of interest rate hikes ahead, Bear Stearns’ Ryding pointed to mitigating factors behind the numbers. The country’s strong productivity growth, he said, can absorb the jump in wages, which on a quarterly basis grew only 3.3 percent. And most of the jobs growth, Ryding said, occurred outside the private sector.
Bonds fell steadily in the weeks ahead of the report as signs of a strengthening economy ignited fears of rising inflation, which erodes a bond’s value.
As such, the report’s strength may have already been accounted for.
"Given the plethora of reports on strong holiday spending and the robust sales pace of automobiles in December, the employment report lacked the ability to take the market aback,” said Tony Crescenzi, bond strategist at Miller, Tabak & Co. "In essence, the market was well prepared for a large payroll gain.”
The Fed ahead
The December jobs report comes as the American economy is poised to set a record for peacetime expansion. Consumer spending is strong, the major stock indexes are near records, and manufacturing is rebounding with the recovery of overseas economies.
Still, there’s at least one sign that the Federal Reserve’s three interest rate hikes last year are having some effect on cooling the economy. New-home sales slipped 7.1 percent to a seasonally adjusted annual rate of 865,000 units in November, well below forecasts, the Commerce Department said Thursday.
Few say the Fed’s inflation-fighting job is done.
"The (jobs) data will not prompt much of a reassessment of the market's view that a 25 basis point hike in February is a done deal,” said Marc Chandler, chief currency strategist at Mellon bank. "The collective judgment is that there is about a 30 percent chance that the Fed moves by 50 basis points rather than 25.”
A more complete picture of inflation and the economy’s strength will come next week with data on consumer and producer prices.
Dollar mixed
The dollar was little changed versus the yen but rose against the euro Friday.
Just before 3 p.m. ET, the dollar traded at 105.22 yen little changed from 105.19 Thursday, one day after the dollar rose to a seven-week high against the Japanese currency.
The euro, meanwhile, fell to $1.0281 from $1.0329 Thursday. While the losses come after a week of gains for the regional currency, most analysts expect the euro to grind higher in the months ahead as Europe’s economy show signs of recovery. 
|
|
|
|
|
 |
|
