Thursday, June 2, 2011

T-notes tumble, job outlook bleak in US

A trader signals an offer in the corn options pit at the CME Group

Source: Press TV

The release of weaker than expected economic figures has damaged the US Treasury market to such an extent that the key 10-year notes yield has decreased and led to investors expecting a further plunge.

For the first time in six months, the yield on the benchmark 10-year Treasury note, fell to 2.97 percent, while the 30-year bond dropped to 4.15 percent. And as new jobs and manufacturing data released show deep weaknesses in the US economy, evidence for the economic recovery is now losing ground.

This means trouble for investors betting on stocks and commodities, or other high-risk assets, Reuters reported.

"The sharp decline… will only add to fears that the economy has hit another soft patch," Capital Economics analyst Paul Ashworth said.

This will come as a disappointment to the large number of unemployed in the US who were hoping the economic recovery would lead to an increase in job opportunities.

“It does look like we have a pretty weak rebound, even weaker than we had considered," Jason Brady, a managing director for Thornburg Investment Management said.

Previously, investors had expected yields to increase. But with the weak and troubled housing and labor market, never-ending debt issues in Europe, and damage to the Japanese economy after the Fukushima earthquake, many are now beginning to change their minds.

“The economy, society and government are fueled by debt," DoubleLine Capital chief executive Jeffrey Gundlach said.

It cannot be successfully managed while interest rates are rising, he added.

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