April 11, 2006 > Bond fall after jobs data shows strength

by MICHAEL S. DERBY, Dow Jones Newswires

NEW YORK (Dow Jones/AP), April 07 _ Bond prices endured big losses Friday in the wake of a report on hiring during March that aided the case for more Federal Reserve rate hikes.

The selling hit at all maturities, continuing the pattern of recent bearish trading. The market closed with yields, which move inversely to prices, near the high point of the session.

The 10-year note was at a level last seen in June 2002, while the long bond's yield was at its highest mark since early December 2004.

At 5 p.m. EST, the 10-year Treasury note was down 20/32 from late Thursday. Its yield was 4.98, up from 4.91 percent.

The 30-year bond was down 1 7/32. Its yield rose to 5.06 percent from 4.98 percent.

The 2-year note was down 4/32, and yielded 4.91 percent, down from 4.84 percent.

Yields on three-month Treasury bills were 4.69 percent, up from 4.67 percent, as the discount rate was 4.57 percent.

The market was already in bad straits before the release of the jobs data, after a dismal session on Thursday. But when the government reported Friday morning that the U.S. economy added 211,000 jobs last month, amid a drop in the unemployment rate to 4.7 percent from 4.8 percent in February, it greased the wheels for more selling in Treasuries.

In economists' view, the jobs data by itself was not a major reason to change one's monetary policy outlook. But what it did do is reinforce the case for the Fed to lift its overnight target rate to 5 percent when it meets on May 10, from the current level of 4.75 percent.

Since the most recent Fed meeting on March 28, most economists had already expected that to happen, but it's been a notion the bond market has struggled to get itself priced for. One bank, UBS, had been the last of the major dealers to think the Fed would stay at 4.75 percent through the rest of this year, and it revised its call Friday to that of Wall Street's current consensus.

The negativity of the Treasury climate could clearly be seen Friday when the market attempted to rally just after the jobs data, in what proved to be a very short-lived effort to find respite from what has for over a week now been most a move to sell Treasuries.