Bond yields rose Wednesday in muted trading ahead of jobs reports in coming days.
What’s happening
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
3.887%
rose 5.4 basis points to 3.891%. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.369%
added 2.7 basis points to 3.369%. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.602%
climbed less than 1 basis point to 3.601%.
What’s driving markets
Short-term Treasury yields, which in the previous session dropped towards the bottom of their recent range on a soft job openings report, are nudging higher as more labor data looms.
The private sector ADP jobs survey will be published on Wednesday at 8:15 a.m., followed on Thursday by the weekly initial jobless claims and then on Friday, when markets are closed for the Easter holiday, the nonfarm payrolls report will be released.
Together, the data may help the Federal Reserve decide what to do with interest rates at its policy meeting in just under a month’s time.
Markets are pricing in a 56% probability that the Fed will leave interest rates unchanged at a range of 4.75% to 5.0% on May 3rd, according to the CME FedWatch tool.
The central bank is expected to reduce its Fed funds rate target to 4.3% by December, according to 30-day Fed Funds futures.
Other U.S. economic updates set for release on Wednesday include the trade balance for February, due at 8:30 a.m.; the final reading of the March S&P services PMI at 9:45 a.m.; and the March ISM services reports at 10 a.m.
What are analysts saying
John Briggs, global head of economics and market strategy at NatWest Markets, said in a note late Tuesday to clients that recent soft jobs data and the fallout from the U.S. banking tremors meant there was “little reason” for the market to reverse the roughly 70 basis points of rate cuts priced in for later this year.
“[P]erhaps the Fed sneaks one more in, but the distribution of probabilities around the policy rate are heavily skewed to the downside, in our view, and we do not think this is something that is going to change in market pricing anytime soon. In any case, key data remains for the rest of this week, including ISM Services [Wednesday], which we are very interested to see – to see if the service sector would have been impacted by financial market stress as soon as the March print,” Briggs added.
This post was originally published on Market Watch
