Treasuries Recover From Early Move To The Downside

(RTTNews) - After initially coming under pressure, treasuries staged a recovery over the course of the trading session on Thursday.

Bond prices climbed well off their worst levels of the day before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.453 percent after reaching a high of 2.487 percent.

The initial weakness among treasuries came following the release of report from payroll processor ADP showing private sector employment jumped by much more than expected in the month of December.

ADP said employment in the private sector surged up by 250,000 jobs in December after climbing by a downwardly revised 185,000 jobs in November.

Economists had expected an increase of about 190,000 jobs, matching the job growth originally reported for the previous month.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the stronger than expected job growth in the ADP report was probably skewed upwards by the recent strength of the Labor Department's non-farm payrolls figures, which are used as one of the inputs

"Nevertheless, after the earlier disruption caused by the hurricanes, the labor market clearly ended 2017 with some considerable momentum," Ashworth said.

A separate report from the Labor Department showed initial jobless claims unexpectedly inched higher in the week ended December 30th.

The report said initial jobless claims edged up to 250,000, an increase of 3,000 from the previous week's revised level of 247,000.

The increase surprised economists, who had expected jobless claims to drop to 240,000 from the 245,000 originally reported for the previous week.

"We wouldn't read too much into that increase, however," Ashworth said. "Claims are notoriously volatile at the best of times and particularly around holidays."

"The bottom line is that claims remain at an unusually low level, providing more evidence of labor market strength," he added.

Traders picked up treasuries at reduced levels following the early decline as they looked ahead to the release of the Labor Department's more closely watched monthly employment report on Friday.

The report is expected to show an increase of about 190,000 jobs in December following the jump of 228,000 jobs in November. The unemployment rate is expected to hold at 4.1 percent.

The jobs data is likely to overshadow separate reports on international trade, service sector activity, and factory orders.