Bonds tumble on bullish jobs report
Sunday, 6 December 2009
NEW YORK, Dec 5 (Reuters): US Treasury debt prices tumbled Friday, sending yields to three-week highs, as a surprisingly small drop in November employment fueled economic recovery hopes and sapped demand for safe-haven bonds.
The government said the US economy lost 11,000 jobs last month, far fewer than the 130,000 analysts had expected, which sent bond prices sharply lower and fueled a rally in riskier assets such as stocks.
Though heartening news for those among the 10 per cent of the work force who are still unemployed, the data are a huge threat to the historically expensive Treasury market.
Bond yields have been kept low on the view that the weak economy and poor jobs outlook will damp inflation and prevent the Federal Reserve from raising interest rates from near zero any time soon, but that notion could now be at risk.
"Treasury market yields are soaring right now because if the economy is going to see sustainable growth, the day is nearing when the Fed will have to make good on its plans for an exit strategy," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.
The government said the US economy lost 11,000 jobs last month, far fewer than the 130,000 analysts had expected, which sent bond prices sharply lower and fueled a rally in riskier assets such as stocks.
Though heartening news for those among the 10 per cent of the work force who are still unemployed, the data are a huge threat to the historically expensive Treasury market.
Bond yields have been kept low on the view that the weak economy and poor jobs outlook will damp inflation and prevent the Federal Reserve from raising interest rates from near zero any time soon, but that notion could now be at risk.
"Treasury market yields are soaring right now because if the economy is going to see sustainable growth, the day is nearing when the Fed will have to make good on its plans for an exit strategy," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.