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TREASURIES-Prices drop as jobless data stoke payrolls hopes
March 7, 2013 / 3:26 PM / in 5 years

TREASURIES-Prices drop as jobless data stoke payrolls hopes

* ECB stays put on rates, avoids dramatic action
    * Bank of England holds back on more stimulus
    * U.S. jobless claims unexpectedly fall

    By Luciana Lopez
    NEW YORK, March 7 (Reuters) - Prices for U.S. Treasuries
dropped on Thursday as a second straight day of
better-than-expected labor market data raised hopes the world's
largest economy was building momentum.
    The number of Americans filing initial claims for
unemployment benefits unexpectedly fell to a seasonally adjusted
340,000 last week, suggesting a pick-up in the labor market
recovery. 
    "This is not a sign of a slowly growing economy," said Chris
Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi
UFJ in New York.
    Still, he said, "the bond market remains focused, to the
extent it trades at all with the 800 pound gorilla of Fed QE
(quantitative easing) on its back, on the unemployment rate." 
    Traders are unlikely to take big risks ahead of tomorrow's
nonfarm payrolls report, he said. 
    Benchmark 10-year Treasury notes slipped 8/32 in
price to yield 1.967 percent, from 1.9427 percent on Wednesday. 
    Prices for 30-year bonds dropped 16/32 to yield
3.179 percent, from 3.1557 percent late Wednesday.  
    
    A payrolls processor report on Wednesday showed a
larger-than-expected 198,000 jobs added by U.S. private
employers in February. 
    The combination of private payrolls figures and jobless
claims boosted hopes that Friday's Labor Department payrolls
report will show more jobs than expected added in February.
    That report is key because the Fed wants to see an
unemployment rate around 6.5 percent - still a good way from the
current 7.9 percent. Analysts in a Reuters poll, however, see
the jobless rate unchanged last month.
    The Fed's support has helped fuel global appetite for
riskier assets, with the bank buying $85 billion per month of
mortgage-backed securities and Treasuries through the year.
    Other central banks on Thursday proved cautious about
changing their policy stance.
    The European Central Bank kept interest rates steady on
Thursday and avoided dramatic action to help Italy or other euro
zone countries, despite the threat of political turmoil in Rome
reigniting the bloc's debt crisis. 
    ECB chief Mario Draghi said price risks were "broadly
balanced" and noted risks of weaker growth. 
    Those comments helped offset the selling of Treasuries, said
Ian Lyngen, a senior government bond strategist with CRT Capital
Group Llc in Stamford, Connecticut.
    In addition, the Bank of England decided not to restart its
main stimulus program for Britain's ailing economy as the
government stuck to its deficit-cutting pledge and said the BoE
should support growth.

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