January 5, 2017 / 4:24 PM / 7 months ago

TREASURIES-Yields fall on uncertain outlook under Trump, Fed minutes

3 Min Read

* ADP payrolls show lower-than-expected job gains

* U.S. jobless claims near lowest since Nov 1973

* U.S. non-manufacturing index rises in Dec

* U.S. Treasury yields fall to multiweek lows (Recasts, adds comment, data on jobless claims, updates prices)

By Gertrude Chavez-Dreyfuss

NEW YORK, Jan 5 (Reuters) - U.S. Treasury debt yields dropped broadly on Thursday, falling for a third straight session, as investors grew uncertain about the incoming Trump administration and waited for more clarity about its policies before taking more positions.

Yields should rise, although for the next few weeks they likely will be range-bound as investors are in wait-and-see mode, said Justin Lederer, interest rate strategist at Cantor Fitzgerald in New York.

"There's a lot of uncertainty until the new administration takes place," he added.

Along with the Trump-related uncertainty, the Treasuries rally has been fueled by the release of Federal Reserve minutes from last month's meeting on Wednesday. Policymakers thought the economy could grow more quickly because of fiscal stimulus under the Trump administration and many were eyeing faster interest rate increases, minutes showed.

Thursday's rally in bond prices - which move inversely to yields - was led by the intermediate sector of the curve, the U.S. five-year and seven-year notes. Yields fell to four-week lows.

Long-dated U.S. debt yields also slid, with 30-year bonds sinking to five-week lows and 10-year notes to four-week troughs.

Buying in Treasuries also accelerated after weaker-than-expected U.S. private sector payrolls data.

The ADP National Employment Report showed that U.S. private employers added 153,000 jobs last month, below economists' expectations for a gain of 170,000.

"The weaker ADP figure does represent a downside risk to our estimate (of non-farm payrolls of 200,000), but given the ADP's very hit-and-miss record, particularly around year-end, we're happy to stick with that slightly above consensus forecast," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

U.S. data on initial jobless claims and the non-manufacturing index painted a rosier picture of the economy, but did little to push yields higher.

U.S. weekly jobless claims dropped to 235,000 for the week ended Dec. 31. That was close to the 233,000 touched in mid-November, which was the lowest level since November 1973.

The U.S. non-manufacturing index, meanwhile rose to 57.2 in December, higher than the expected reading of 56.2.

In late-morning trading, the U.S. 10-year note was up 13/32 in price to yield 2.402 percent, compared with 2.452 percent late on Wednesday. It hit a four-week low of 2.401 percent earlier.

U.S. 30-year bond prices were up 21/32, yielding 3.012 percent, down from Wednesday's 3.048 percent. Yields touched a five-week trough of 3.004 percent.

U.S. two-year note yields were at 1.194 percent from 1.234 percent on Wednesday. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama and Jeffrey Benkoe)

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