Treasury prices tumble as US jobless rate falls

The Standard & Poor’s (S&P)& 500 index rose for a fifth straight day yesterday while US Treasury prices tumbled after the American unemployment rate fell unexpectedly to a near four-year low.

The dollar advanced to a two-week high versus the yen and the euro gained as investors sold the US and Japanese currencies, which are often perceived as safe havens.

The US added 114,000 jobs last month, driving the jobless rate down to 7.8%, its lowest since Jan 2009, reported the labour department. Payroll gains for both July and August were revised higher.

“The details were about as good as they realistically could be under the circumstances,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

The Dow Jones industrial average gained 53.81 points, or 0.40%, to 13,629.17. The S&P’s 500 Index rose 5.30 points, or 0.36%, to 1,466.70. The Nasdaq Composite Index added 5.99 points, or 0.19%, to 3,155.45.

The MSCI global stock index rose 0.6% to 337.58. Europe’s FTSEurofirst 300 index rallied 1% to 1,111.65.

European markets had risen earlier after reassurance from the ECB on Thursday that it stood ready to buy Spain’s bonds if it requested aid.

The ECB also said Europe had a “fully effective backstop mechanism in place” to protect the euro.

The ECB envisions buying large volumes of sovereign debt for periods of one to two months once its bond-buying programme is triggered, senior central bank sources told Reuters.

The dollar rose to 78.87 yen, the highest since Sept 19, before pulling back to 78.68 yen, up 0.3% on the day. The euro rose 0.2% to $1.3046.

Safe-haven government bond prices fell. The benchmark 10-year US Treasury note was down 13/32, with the yield at 1.7167%.

“Treasuries sank after the jobs report,” said Cary Leahey, economist and senior advisor to Decision Economics in New York.

“Though September job growth was close to expectations, several facets of the report, particularly the large drop in the unemployment rate to 7.8%, suggested that the Fed was closer to the exit window,” he said, referring to the Federal Reserve’s programme of unconventional monetary easing.

Brent futures lost $1.65 to $110.93 a barrel. US crude futures eased $2.35 to $89.36 per barrel, after climbing nearly 4% in the prior session.

Gold touched its highest level since last November, taking a cue from euro strength. Spot gold rose above $1,795 an ounce earlier and last traded at $1,782.

— Reuters