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November 3, 2006

Lower US unemployment sends bond prices lower

Permalink: Lower US unemployment sends bond prices lower
by Elaine Frei

Yields were up on US Treasury bonds on Friday as a new report showed that unemployment in the United States fell to 4.4 percent in October. Even though job growth was at 92,000 new jobs in the month, less than had been anticipated, the numbers from previous months were revised upward. The new data diminished the likelihood that the Federal Reserve will drop interest rates early next year, but most analysts still do not see any rate hikes coming in the near future.

In late morning trade, yields on 10-year Treasury bonds were 10 basis points higher to a yield of 4.70 percent. The jump took yields up 2 basis points on the week.

In the Eurozone, bond yields were also up as expectations continued that the European Central Bank will raise interest rates next month. Unemployment in the region remained at 7.8 percent in September, as had been anticipated. The ten-year Bund added 2 basis points to a yield of 3.76 percent but was still 5 basis points lower than at the beginning of the week. In the UK, meanwhile, ten-year gilts were up 3 basis points on the day to 4.58 percent, but were fractionally lower than the 4.59 percent level where they were trading at the beginning of the week.



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