March 6, 2019 / 3:22 PM / 3 months ago

TREASURIES-Yields drift lower ahead of ECB meeting, U.S. payrolls data

    * U.S. ADP report shows new private sector jobs of 183,000
    * ECB could cut growth, inflation forecast
    * Focus on U.S. nonfarm payrolls report

 (Recasts, adds comment, table, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, March 6 (Reuters) - U.S. Treasury yields retreated
on Wednesday, as stocks weakened and risk appetite dimmed, with
investors awaiting this week's European Central Bank monetary
policy meeting as well as the U.S. nonfarm payrolls report for
February.
    Wall Street shares traded lower on the day, falling after a 
strong start this year, and analysts said that may have
contributed to higher Treasury prices.
    The economic backdrop around the world has also been far
from ideal amid growth concerns, analysts said. 
    The  Organization for Economic Co-Operation & Development on
Wednesday cut forecasts again for the global economy in 2019 and
2020, following previous downgrades in November, as it warned
trade disputes and uncertainty over Brexit would hit world
commerce and businesses.
    "It seems like the rally in risky assets seems to be running
out of steam," said Subadra Rajappa, head of U.S. rates strategy
at Societe Generale in New York.
    "Overall though, the market is trading sideways ahead of the
ECB meeting and the U.S. payrolls report. I wouldn't read too
much into today's moves," she added.
    U.S. rates typically track German bond yields on the day of
an ECB policy meeting.
    Weak euro zone data the last couple of weeks has fueled
expectations that the ECB at Thursday's meeting could downgrade
its growth and inflation forecasts for 2019 and hold off raising
interest rates, analysts said.  
    "A downgrade of the 2019, and maybe 2020, GDP projection
won't come as a surprise," Macquarie said in a research note.
    "Indeed, the ECB's rhetoric has already signaled a cut in
the growth outlook, and it has been the ECB's recurring theme to
be in GDP-cutting mode since Q2 2018 anyway, when the first big
cuts in 2018 growth projections took place," the bank added.
    In the United States, a report by payrolls processor ADP
showed that new private-sector jobs totaled 183,000, lower than
market expectations of 189,000. But the January figure was
revised higher to 300,000 from ADP's original estimate of
213,000.
    Treasuries reacted little to the ADP report.
    "The ADP report isn't always a reliable predictor of the BLS
(Bureau of Labor Statistics) data, but it looks broadly
consistent with our view that job growth remained solid in
February despite cooling from the boomy figures reported for the
prior several months," said Daniel Silver, economist at JP
Morgan in New York.
    Reuters forecasts showed nonfarm payrolls of 180,000 for
February.
    In midmorning morning trading, U.S. 10-year note yields
slipped to 2.704 percent from 2.722 percent late on
Tuesday.
    U.S. 30-year bond yields also fell, to 3.072 percent
 from 3.087 percent on Tuesday.
    On the short end of the curve, U.S. 2-year yields were
likewise down at 2.532 percent, compared with Tuesday's 2.551
percent.

      March 6 Wednesday 10:10AM New York / 1510 GMT
                                                      
                                                      
                                                      
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             2.41         2.4584    -0.007
 Six-month bills               2.46         2.5325    0.000
 Two-year note                 99-239/256   2.5344    -0.017
 Three-year note               99-246/256   2.5136    -0.013
 Five-year note                99-88/256    2.5159    -0.015
 Seven-year note               99-72/256    2.6132    -0.018
 10-year note                  99-76/256    2.706     -0.016
 30-year bond                  98-136/256   3.0753    -0.012
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap        10.25         0.25    
 spread                                               
 U.S. 3-year dollar swap         7.75        -0.25    
 spread                                               
 U.S. 5-year dollar swap         6.00         0.25    
 spread                                               
 U.S. 10-year dollar swap        1.25         0.25    
 spread                                               
 U.S. 30-year dollar swap      -19.75         0.25    
 spread                                               
 
 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Jeffrey
Benkoe and Jonathan Oatis)
  
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