Treasuries pared losses as congressional leaders prepared a vote to raise the U.S. debt limit, curtailing the risk of a default and encouraging demand for U.S. debt.
Yields on two-year debt touched the lowest level since July 19. Ten-year notes earlier fell the most in more than one week after lawmakers approved a debt plan yesterday and President Barack Obama announced the pact on television in Washington. The U.S. economy added fewer-than-average jobs this month, a report Aug. 5 is forecast to show.
“Everything comes down to the vote,” said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. “Nobody knows whether the vote will go through. The economy is still slow and people are still very nervous.”
The yield on the benchmark 10-year note climbed one basis point to 2.80 percent as of 8:35 a.m. in New York, according to Bloomberg Bond Trader prices. The security yielded 2.77 percent at the end of last week, the least since Nov. 30. The 3.125 percent note due in May 2021 slid 2/32, or 63 cents per $1,000 face amount, to 102 23/32.
Yields on two-year notes were little changed at 0.36 after touching 0.35 percent. Thirty-year bonds yielded 4.15 percent, three basis points more than their previous close. Futures on the Standard & Poors 500 index rose 1 percent.
The Treasury Department has said it will breach the borrowing limit and run out of options for avoiding default tomorrow without action by Congress to raise the debt ceiling. The House plans votes today and the Senate may follow suit to consider the agreement reached during a weekend of negotiations that capped a months-long struggle between Obama and Republicans over raising the $14.3 trillion debt ceiling.
A report this week may show U.S. payrolls added 88,000 jobs in July, from 18,000 the previous month, according to the median forecast of economists in a Bloomberg News survey before the Labor Department reports the data. That compares with an average monthly increase of 126,000 from January through June.