Surveys peg next big move in yields higher

By Chris Reese

NEW YORK (Reuters) – More investors expect the next 25-basis-point move in U.S. five-year Treasury note yields to be to the upside, according to the results of two surveys released on Thursday by industry analysts.

Forty-nine percent of respondents expect the next 25-basis-point move in five-year yields to be higher from the 2.12 percent level, said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut, which surveyed clients ahead of Friday’s non-farm payrolls data for February.

Twenty-seven percent said the next move in five-year rates would be lower, while 24 percent said they did not know, Ader said.

Five-year Treasury note yields were trading at 2.30 percent on Thursday, up from 2.18 percent late Wednesday.

A separate survey of clients by RBS Securities Inc found 44 percent of respondents expect the next 25-basis-point move in five-year yields to be higher from 2.18 percent, according to John Briggs, Treasury strategist at RBS in Stamford, Connecticut.

In the RBS survey, 41 percent said the next 25-basis-point move in five-year yields was expected to be lower, while 15 percent said they did not know, Briggs said.

Neither CRT or RBS detailed the size of their respective client survey, or disclosed the reasoning behind respondents’ expectations. Both companies typically conduct such surveys ahead of the release of the government’s monthly employment data.

“The results of our March non-farm payrolls survey, for the February release, were skewed to the bearish side (for Treasuries), but not particularly more so than has been the case for the last several months,” Ader said.

On a special question in the CRT survey, 77 percent said higher oil and gasoline prices would be bullish for Treasuries because high prices would act as a tax on the consumer and slow the economic recovery.

Twenty-three percent said high energy costs would be bearish for bonds due to rising inflation expectations.

In the CRT survey, 87 percent of respondents said sustained oil prices in the $120 to $130 per barrel range would extend the time horizon for the Federal Reserve to raise interest rates from the current level near zero, while 13 percent said such an oil price scenario would move Fed monetary tightening forward.

In the RBS survey, a special question found 32 percent believe employment and a lack of jobs growth are the greatest risk to the U.S. recovery, while 22 percent said the greatest risk was oil and 20 percent pegged it to fiscal deficits. Twelve percent said the greatest risk was housing, while seven percent cited U.S. inflation.

The median of forecasts from analysts polled by Reuters is for employers to have added 185,000 jobs in February, above the 36,000 jobs added in January.

The government’s non-farm payrolls data will be released on Friday at 8:30 a.m. EST(1330 GMT).

(Editing by Dan Grebler)