Bonds fall on growing job rate

New York: US Treasuries prices fell for a third straight day yesterday as data on the US labour market offered at least a temporary balm for fears the world's largest economy may be headed for a double-dip recession.

The government reported that the US private sector added 67,000 jobs, a surprisingly large number, to payrolls in August.

The Labour Department also said that overall US employment fell for a third straight month, but the drop was far less than the market expected.

The data weakened investors' demand for safe-haven US government debt, causing the benchmark 10-year Treasury note to fall more than a point in price, its yield rising to 2.76 per cent from 2.625 per cent late on Thursday.

"We've seen some pretty hefty asset allocation trades out of bonds and into stocks," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

Overall non-farm payrolls fell by 54,000 but this was largely because temporary federal census jobs decreased by 114,000, and so private employment was seen as a better measure of labour market health.

Bonds erased some losses, however, when an index of activity in the nation's non-manufacturing sector came in weaker than expected.

The 30-year bond, down two points before the Institute for Supply Management data was released, was down 1-10/32 afterward. Its yield stood at 3.79 per cent versus 3.72 per cent on Thursday.

The employment component of the ISM index came in below 50, a reading that points to shrinking hiring.

"[The ISM index was] a weaker number, so Treasuries pared some of the day's losses," said Sean Simko, fixed-income portfolio manager with Investment Management Company SEI in Oaks, Pennsylvania.

Simko said the below-50 reading on the employment component showed that companies "continue to be wary of hiring".

The Treasury market also faces supply next week with the Treasury auctioning three-, 10- and 30-year securities.

The supply provided an "extra incentive to cheapen up the Treasury market a little," Rupert said.

Before a long holiday weekend, "huge" market moves might not be sustained, she added.