Gov debt pare gains after tepid 7-yr sale

By Karen Brettell

NEW YORK (Reuters) – U.S. Treasuries pared gains after a $29 billion auction of new seven-year notes saw tepid demand, with the debt now expected to be largely rangebound ahead of key employment data on Friday.

The new notes priced at a 1.7 basis point concession over where the Treasuries were trading before the sale. Some of that weakness may have been due to the market having been bid up before the auction, analysts said.

“We didn’t see anything that said it was time to rally,” said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee. “Its time to not to get hurt in an auction, its not time to get aggressive or try to move in front of people with all the money.”

Seven-year notes traded up 6/32 in price to yield 2.87 percent, after trading as low as 2.85 percent before the auction.

Prices had been supported earlier on Wednesday after data from ADP Employer Services showed that private employers added 201,000 jobs in March, in line with expectations but disappointing traders that had hoped for an even stronger report.

Some traders are expecting non-farm payroll data released on Friday will show that employers added more than 250,000 jobs in March, far above the 190,000 expected by economists.

“The ADP number today although in line may have reduced some of the bullish calls for a really strong non-farm payroll number on Friday,” said Jason Rogan, director of U.S. Treasury trading at Guggenheim Capital Markets in New York.

Nonetheless, “the market is still anticipating a pretty strong nonfarm payroll number, I wouldn’t be surprised if the market is short covering going in the next two days in front of the number,” he added.

Two-year notes rose 2/32 in price to yield 0.81 percent, down from 0.83 percent late on Tuesday, and five-year notes rose 5/32 in price to yield 2.23 percent, down from 2.26 percent.

Ten-year notes rose 7/32 in price to yield 3.47 percent, down from 3.49 percent and thirty-year bonds rose 12/32 in price to yield 4.53 percent, down from 4.54 percent.

(Additional reporting by Ellen Freilich; Editing by Andrew Hay)

Gov debt pare gains after tepid 7-yr sale