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Bond Report: Treasury yields edge lower as U.S. stocks seen tilting higher

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U.S. government bond yields were slightly lower Thursday, as investors awaited a fresh batch of data, including a weekly update on claims for unemployment benefits that comes ahead of Friday’s monthly jobs report.

What yields are doing
  • The 10-year Treasury note yields
    TMUBMUSD10Y,
    1.289%

    1.289%, compared with 1.301% on Wednesday at 3 p.m. Eastern Time.
  • The 2-year Treasury note rate
    TMUBMUSD02Y,
    0.207%

    was at 0.200%, versus 0.211% in the session before.
  • The 30-year Treasury bond
    TMUBMUSD30Y,
    1.905%

    was yielding 1.905%, compared with 1.919% a day ago.
What’s driving the market?

All eyes remain fixed on Friday’s August jobs report from the U.S. Labor Department, but investors appear inclined to buy Treasurys ahead of the update on the employment situation, which could help to provide some guidance about the timing for tapering of bond purchases by the Federal Reserve that have provided liquidity for financial markets during the pandemic.

Last Friday, Fed Chairman Jerome Powell in a Jackson Hole speech signaled that the central bank would likely aim to taper purchases of Treasurys and mortgage-backed bonds by the end of 2021 but didn’t provide precise timing, and he suggested that upcoming economic data remained a key determinant for monetary policy makers.

Ahead of the Friday nonfarm payrolls data, investors on Thursday are watching for a U.S. jobless benefit claims report for the week ended Aug. 28, which is forecast to show 350,000 claims, versus 353,000 in the prior period.

At the same time, reports on international trade in goods and services are due, and as is a reading of productivity and costs. A report on factory orders is due at 10 a.m.

Thursday’s batch of data follows a private-sector jobs report for August from Automatic Data Processing
ADP,
-1.04%

that showed 374,000 jobs were added for the month, well below the Dow Jones estimate of 600,000. 

Later Thursday, market participants are expecting to hear from Atlanta Federal Reserve President Raphael Bostic at 10 a.m., and San Francisco Fed President Mary Daly at 3 p.m.

What analysts are saying

“Treasuries remain in a consolidation pattern ahead of tomorrow’s jobs data. If the disappointing ADP data hasn’t recalibrated one’s expectations for the August payrolls report, there is nothing on offer via today’s information that will,” wrote Ian Lyngen and Ben Jeffery, part of the duo of interest rates analysts at BMO Capital Markets, in a Thursday research note.

“We continue to view any backup in outright yield levels following NFP as a buying opportunity. It isn’t lost on us that this is the first employment update since Powell’s unofficial confirmation that tapering will be announced by year end,” the analysts wrote.

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