Bond Report: Treasury yields struggle for direction as surge in jobless claims starts to slow

Bond Report

U.S. jobless claims rose by 4.43 million last week

U.S. Treasury yields struggled for direction on Thursday as labor market data offered signs that the pace of job losses could be slowing down even though another 4 million Americans filed for unemployment benefits.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
0.594%

was down 0.5 basis point to 0.613% The 2-year note yield
TMUBMUSD02Y,
0.224%

rose a basis point to 0.219%. The 30-year bond yield
TMUBMUSD30Y,
1.168%

fell 1.5 basis points to 1.204%. Bond prices move in the opposite direction of yields.

What’s driving Treasurys?

Around 4.43 million Americans filed for unemployment benefits last week, down from 5.24 million in the week before that. Though, the pace of job losses may be slowing, the latest claims numbers underlines the dire health of the U.S. labor market, which only two months ago had seen a 50-year low in the jobless rate.

In other U.S. data, new home sales for March ran at annualized pace of 627,000 on March.

Dismal economic data in Europe, however, was mostly shrugged off by traders. German, French, and U.K. purchasing managers indexes for the manufacturing sector showed the contraction in factory activity was deepening this month.

An auction for 5-year Treasury inflation-protected securities saw fierce demand indicating investors were looking to insure against a potential surge in consumer prices, given massive fiscal stimulus, but an increasingly diminished risk as the global economy stays shuttered.

Still, inflation expectations remain depressed, with the 10-year breakeven rate stands at 1.07%. It represents what buyers of Treasury-inflation protected securities forecast for inflation over the next decade.

What did market participants’ say?

“While claims narrowly beat (were lower than) expectations last week, we believe the current trend of higher claims will continue in the near term due to bottlenecks in processing claims as well as complications with small business stimulus measures,” said Jeff Schulze, investment strategist at ClearBridge Investments, in e-mailed comments.

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