Bond yields fell on Thursday. with traders wary that looming jobs data will confirm the U.S. economy is cracking under the weight of sharp interest rate increases.
- The yield on the 2-year Treasury TMUBMUSD02Y,
3.729%fell 8 basis points to 3.724%. Yields move in the opposite direction to prices.
- The yield on the 10-year Treasury TMUBMUSD10Y,
3.284%retreated 3.2 basis points to 3.281%.
- The yield on the 30-year Treasury TMUBMUSD30Y,
3.562%fell 1.2 basis points to 3.560%.
What’s driving markets
The 10-year Treasury yield was in line to post a seventh consecutive session of declines, its longest retreat since March 2020, as investors worry that looming jobs data may confirm a sharper U.S. economic slowdown.
The nonfarm payrolls report for March will be published on Good Friday when there will be an abbreviated Treasury trading session.
The survey follows other weak data this week — including a private sector jobs report and a reading of service sector activity — that have cemented the view that the Federal Reserve may have to start cutting interest rates later this year.
Markets are pricing in a 58.2% probability that the Fed will leave interest rates unchanged at a range of 4.75% to 5.0% after its meeting on May 3rd, according to the CME FedWatch tool.
The central bank is expected to take its Fed funds rate target back down to 4.1% by December 2023, according to 30-day Fed Funds futures.
U.S. economic updates set for release on Thursday include the weekly initial jobless claims at 8:30 a.m. St. Louis Fed President Bullard will make a speech at 10 a.m. All times Eastern.
What are analysts saying
“A number of U.S. releases suggested that the economy is beginning to wilt under the pressure of the Federal Reserve’s aggressive hiking policy, with attention now turning to the scale of a recession, rather than whether one will happen. Weakness was seen in demand for home loans, activity in the services sector and a private sector number which was comfortably shy of expectations,” said Richard Hunter, head of markets at Interactive Investor.
“The most eagerly awaited economic release of any given month is the non-farm payrolls report, which is still due on Friday despite the market being closed. The expectation is for 240,000 jobs to have been added in March, following a blowout number in January and a higher than expected 311,000 number in February.”
“The closure of the market on Friday means that equity traders will be unable to react to the release until next week which, coupled with the long weekend, has seen some traders squaring positions and being unwilling to open new ones given the extended break,” Hunter added.