* U.S. stocks gain over 1 percent
* Jobless claims last week rise to highest since January
* Producer prices unchanged in March
* Fed to auction $13 bln of 30-year bonds
By Chris Reese
NEW YORK, April 12 (Reuters) – U.S. Treasury debt prices
eased on Thursday as stock market strength eroded the safe-haven
allure of U.S. government debt, offsetting earlier data showing
higher-than-expected jobless claims.
U.S. stocks rose by over 1 percent on Thursday after
concerns eased about rising yields in some euro zone countries
and on bets corporate America will beat a lowered bar for
earnings expectations.
Earlier, bonds had been on a firm footing because of jobless
claims data for last week that reinforced recent payrolls data
showing the U.S. labor market continues to struggle.
Also, a below-forecast, zero increase in the producer price
index in March fueled speculation the Federal Reserve could
eventually step in with a third round of debt buying, or
monetary stimulus known as quantitative easing.
“Claims were the highest in almost three months and
inflation pressures appear to be easing off, at least as
measured by PPI,” said Thomas Simons, money market economist at
Jefferies & Co. in New York.
“These two data points will add more fuel to the fire for
the debate over QE3,” he said, referring to talk that the Fed
could decide to buy more Treasuries or mortgage-backed
securities in a third bout of quantitative easing.
Benchmark 10-year notes were trading 6/32 lower
to yield 2.06 percent, up from 2.04 percent late Thursday, while
the 30-year bond was 10/32 lower to yield 3.21
percent from 3.19 percent.
Expectations of further monetary stimulus were bolstered
last week after the government reported much smaller jobs growth
in March than had been expected.
U.S. Federal Reserve vice chair Janet Yellen said on
Wednesday the Fed has a variety of options if it decides to seek
another round of asset purchases. Yellen said easy monetary
policy is appropriate given high unemployment and the headwinds
facing the economy as she left the door open to further action.
New York Fed president William Dudley said on Thursday that
U.S. policymakers are considering the costs and benefits of
additional monetary stimulus and are ready to deploy a third
round of quantitative easing measures if the economic outlook
were to worsen.
The Fed’s current stimulus program, nicknamed “Operation
Twist,” extends the maturity of the central bank’s debt holdings
and is set to expire at the end of June.
Results from the U.S. Treasury department’s $21 billion
offering of reopened 10-year debt on Wednesday met demand that
was largely in line with market expectations. However, some data
within the auction results suggested weak demand after a sharp
rally in bonds since last Friday’s disappointing U.S. payrolls
data.
An auction of $32 billion of three-year notes on Tuesday was
met with solid demand, and the Treasury is set to sell $13
billion of reopened 30-year bonds on Thursday.
In Europe, Italian three-year borrowing costs jumped more
than 1 percentage point at a bond auction compared to a month
ago, but 10-year debt yields in both Italy and Spain dipped,
with some easing of concerns over Europe’s debt troubles.
