* ADP payrolls show lower-than-expected job gains
* U.S. non-manufacturing index rises in Dec
* U.S. Treasury yields fall to multiweek lows
(Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 5 U.S. Treasury debt yields
dropped broadly on Thursday, falling for a third straight
session, as investors grew risk-averse amid uncertainty about
the incoming Trump administration.
"What's going on in the rates markets is that we had a
really powerful expectation of reflation priced in over an
eight-week period," said Guy LeBas, chief fixed income
strategist, at Janney Montgomery Scott LLC in Philadelphia.
"And that power is unjustified by some long-term
fundamentals such as demographics and productivity in the U.S."
U.S. Treasuries had sold off, pushing yields higher, in the
final quarter of last year, primarily due to the election of
Donald Trump as U.S. president and the expectation of easier
fiscal policy and higher interest rates based on his campaign
promises of increased infrastructure spending and tax cuts.
Yields should rise again despite weakness early in the year,
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 next administration
takes place," Lederer said. "We'll be in ranges until we know
more about the Trump presidency."
Thursday's gains in Treasury prices were led by the
intermediate sector of the curve, the U.S. five-year
and seven-year notes. Their yields fell to four-week
Long-dated U.S. debt yields also slid, with 30-year bonds
sinking to five-week lows and 10-year notes to four-week
Buying in Treasuries also accelerated after
weaker-than-expected U.S. private sector payrolls data earlier
in the session.
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.
Investors are now focused on Friday's U.S. non-farm payrolls
report in which economists expected jobs gains of 178,000 in
U.S. data on initial jobless claims and the
non-manufacturing index on Thursday painted a rosier picture of
the economy, but did little to push yields higher.
In late trading, the U.S. 10-year note was up
25/32 in price to yield 2.358 percent, compared with 2.452
percent late on Wednesday. It hit a four-week low of 2.346
U.S. 30-year bond prices were up more than a point, yielding
2.950 percent, a five-week low.
U.S. two-year note yields were at 1.174 percent
from 1.234 percent on Wednesday. Earlier, two-year yields
touched a three-week trough.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey
Benkoe and Tom Brown)