Reply #81: Treasuries down on BOJ decision, payroll posturing

[UpInArms]

http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyid=2006-03-09T173029Z_01_N09416025_RTRIDST_0_MARKETS-BONDS-UPDATE-1.XML

NEW YORK, March 9 (Reuters) - U.S. Treasury debt prices fell on Thursday in the wake of the Bank of Japan abandoning its super-loose monetary policy, which some fear could cut demand for U.S. debt in the coming months.

The Bank of Japan on Thursday ended a five-year-old experiment with flooding the market with funds and returned to a more conventional monetary regime, but said short-term rates would be kept near zero for now.

The lower prices also reflected preparations for a 10-year note auction at 1 p.m. EST (1800 GMT). Dealers often try to push down Treasuries prices ahead of an auction in the hope of picking up the new paper at a lower price, a tactic known as cheapening or building a concession into the market.

But after a week of selling that lifted 10-year Treasury note yields to 21-month highs -- and above two-year yields for the first time since late January -- the market was technically worn out.

"The market is oversold. Payrolls are coming (Friday), and we're expecting a really strong number," said one trader at a primary Treasuries dealer.

Wall Street economists expect the government will report that U.S. employers added 210,000 jobs in February, though bond and currency traders have been kicking around a "whisper" number of 300,000. That would likely fuel a powerful sell-off of short-dated notes and probably push short-dated yields above longer-term debt, reinverting the Treasury yield curve.

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