* U.S. stocks gain over 1 percent, bond losses limited
* Jobless claims last week rise to highest since January
* Producer prices unchanged in March
By Emily Flitter
NEW YORK, April 12 (Reuters) – U.S. Treasury debt prices
edged lower on Thursday but the main driver for their declines
seemed to be the afternoon’s 30-year Treasury bond auction,
after which losses in the market faded significantly.
The U.S. Treasury sold $13 billion in re-opened 30-year
bonds at a high yield that matched the 30-year yield in the open
market at the time of the auction.
Kevin Walter, global head of Treasury trading at BNP Paribas
in New York, said the slight bounce in prices also happened once
traders saw that a support level identified on the 30-year’s
price had held.
This calmed worries in the market that the selling in
Treasuries would take prices all the way back to lows reached
after the most recent payrolls report from the U.S. Labor
Department, which showed lower-than-expected job growth in
March.
“The fact that that held, we’ve gotten through the supply
for the week, and we have seen marginally better buying by asset
managers, both in the auction and afterwards too, I think we’re
bouncing a little,” Walter said.
U.S. stocks, which often move inversely to Treasury
prices, rose by over 1 percent on Thursday after concerns eased
about rising government debt 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
unexpectedly high jobless claims data for last week that
reinforced recent payroll 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 3/32 lower
to yield 2.05 percent, up from 2.04 percent late Thursday, while
the 30-year bond was 6/32 lower to yield 3.20
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.
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 payrolls data.
An auction of $32 billion of three-year notes on Tuesday was
met with solid demand.
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.
