Bonds edge up after weak jobs data

thur jan 13 436pm.pngClick on the chart for additional bond data. By Catherine Clifford, staff reporter


NEW YORK (CNNMoney) -- Treasury prices edged higher Thursday after disappointing numbers on the job front and the third of three scheduled debt auctions for the week. Meanwhile, eurozone debt worries got a bit of relief.

Before the opening bell, the government reported that the number of Americans filing for their first week of unemployment benefits jumped sharply last week, two weeks after hitting a 2-1/2 year low below 400,000. There were 445,000 initial jobless claims filed in the most recent week, which was much higher than expected.

Meanwhile, continuing claims -- a measure of Americans who have been receiving benefits for a week or more -- fell to 3.8 million.

There was also a report out showing wholesale inflation rose slightly more than expected and another showing the U.S. trade balance was nearly unchanged.

While Thursday's data was mixed overall, economic reports have been positive lately. When investors feel more positive about the economy, they tend to move out of the safe haven of bonds and into riskier investments, such as stocks.

"The economic indicators that we have seen have pointed to a slow, but sure economic recovery. That is always going to weigh on the fixed-income markets," said David Katz, principal and senior portfolio strategist at Weiser Capital Management.

In the last few months, the yield on the benchmark 10-year Treasury has risen by about a point as the price has fallen.

Even as U.S. economic data has been better, the eurozone's ability to manage its debt has been a wildcard on investors' plates. However, investors have seen some positive indicators this week that eurozone nations will be able to meet their obligations. In particular, Spain auctioned off $3.9 billion (€3 billion) worth of its debt Thursday.

But that still doesn't mean investors are confident that the region is stable. "People look at Europe as a little bit unstable," said Katz. "There are some big problems and we don't know how far they have reached."

Also on Thursday, the rating agency Moody's warned that the United States' fiscal stimulus policies -- spending instead of focusing on debt reduction -- creates "a small but increasing likelihood that markets will demand a higher risk premium on government debt, in sharp contrast to the safe-haven status that the U.S. Treasury bond has long enjoyed."

But ratings agencies don't have a whole lot of power to move markets. "It is always going to raise the eyebrow of the average investors," said Katz. "But I don't think it is going to have a tremendous impact because I don't think people put too much weight on what the rating agencies are saying anymore."

That doesn't mean those concerns aren't real, however. The U.S. government's stimulus spending will have consequences.

"We are back to that kick-the-can-down-the-road philosophy," said Katz. "At some point all this stimulus will catch up to us: When and in what form remains to be anyone's guess." He also added that while the stimulus efforts might have unknown consequences, so too would have not using stimulus.

On Thursday, the yield on the benchmark 10-year note slipped to 3.30% from 3.37% late Wednesday. The yield on the 30-year bond edged lower to 4.50%, while the 5-year note edged down to 1.91% and the 2-year note dipped to 0.59%. Prices and yields move in opposite directions.

Bond traders have been keeping a close eye on three government debt auctions totaling $66 billion this week. The first two auctions met more robust demand than the third and final auction of the week because they were for shorter-term notes.

On Tuesday, the government sold $32 billion in three-year notes. The bid-to-cover ratio for the auction was 3.06, meaning that there was almost $98 billion worth of demand for the $32 billion worth of debt sold.

Wednesday's $21 billion auction of 10-year notes was also met with strong demand. The bid-to-cover ratio of 3.3 means that there was more than $69 billion worth of demand for the $21 billion worth of debt.

But the uncertainty of the global recovery has left investors less confident of their long-term outlook, making longer-term debt more risky and slightly less desirable.

Still, the final of the three debt auctions on Thursday sold $13 billion in 30-year bonds at a bid-to-cover ratio of 2.67. That means there was almost $35 billion worth of demand for the $13 billion of debt sold.  To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 28,135.38 3.33 0.01%
Nasdaq 8,734.88 17.56 0.20%
S&P 500 3,168.80 0.23 0.01%
Treasuries 1.82 -0.08 -4.11%
Data as of 11:34am ET
Company Price Change % Change
Advanced Micro Devic... 41.15 -1.44 -3.38%
Danaher Corp 148.52 -2.78 -1.84%
General Electric Co 11.34 -0.10 -0.87%
Bank of America Corp... 34.44 -0.24 -0.69%
Ford Motor Co 9.23 -0.09 -0.97%
Data as of Dec 13

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.