Jobless and factory data, while Fed buys

By Chris Reese

NEW YORK (BestGrowthStock) – Expectations that data on Thursday will show a decline in first-time weekly jobless claims and a rise in manufacturing activity is likely to drag on bond prices.

With Treasury debt yields at comparatively low levels, some analysts said the risk overall is for lower bond prices.

“I view the great bull market in bonds to be approaching a speculative blow-off, and I am increasingly of the view that shorting the U.S. bond market will be the trade of the decade,” said Doug Kass, a fund manager at Seabreeze Partners in Palm Beach, Florida.

Initial claims for jobless benefits for the week ended August 14 are expected to have fallen to 476,000 from 484,000 the week previous, according to the median of forecasts from analysts polled by Reuters.

While still alarmingly high, a reduction in the level of claims would at least be a hopeful step that high U.S. unemployment may be in retreat.

“The trend seems to be downward, and that should be evident now that we are past the chaos caused by the retooling shutdowns in the auto sector,” said Carl Weinberg, chief economist at High Frequency Economics in Rhinebeck, New York.

In addition, a gauge of factory activity in the U.S. Mid-Atlantic region could offer a clue as to whether manufacturing, which has been one of the key drivers of the economic recovery, is sputtering.

The Philadelphia Federal Reserve Bank’s business activity index is expected to rise to 7.0 for August from 5.1 in July. Any reading above zero indicates expansion in the region’s manufacturing.

Meanwhile, the Treasury will announce the sizes of next week’s auctions of two-year, five-year, and seven-year notes, along with reopened 30-year Treasury inflation protected securities.

Analysts expect the total size of the issuance to be in the $107 billion to $108 billion area.

Some worried that with two-year note yields hovering near record lows at 0.51 percent, investors may be reluctant to pay up for them in next Tuesday’s auction unless prices are whittled lower.

“Our sense is that twos are reaching a point where interest will begin to wane unless concessions are made in the coming days,” said Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets in New York.

While the Treasury is set to announce the size of next week’s sales, the Fed will be out buying Treasuries on Thursday, targeting maturities ranging from August 2016 through August 2020.

The purchase will be the second of the central bank’s program to buy U.S. government debt using funding from maturing mortgage securities it holds, in an effort to maintain the size of its balance sheet.

The central bank has said it intends to buy about $18 billion of Treasuries from mid-August through mid-September.

(Editing by Leslie Adler)

Jobless and factory data, while Fed buys