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Bond Report: Treasury yields end mixed after ADP jobs report misses expectations

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Treasury yields traded mixed Wednesday, after a report on U.S. private-sector employment came in weaker than forecast, highlighting a cutback in jobs creation amid the spread of the coronavirus delta variant.

Read:Consumer confidence sinks to 6-month low on delta anxiety and high inflation

What yields are doing
  • The 10-year Treasury note yield
    TMUBMUSD10Y,
    1.297%

    was at 1.301%, compared with 1.303% on Tuesday at 3 p.m. Eastern Time. Yields move opposite to prices.
  • The 30-year Treasury bond
    TMUBMUSD30Y,
    1.914%

    was yielding 1.919%, versus 1.927% a day ago.
  • The 2-year Treasury note yields
    TMUBMUSD02Y,
    0.211%

    rose to 0.211%, compared with 0.207% Tuesday.
What’s driving the market?

A report on private sector employment from Automatic Data Processing for August showed that 374,000 jobs were added for the month, well below the Dow Jones estimate of 600,000, and the reading for July was cut to 326,000 from an initial 330,000 reading.

The ADP report comes ahead of the more closely followed Friday jobs report from the U.S. Labor Department, which doesn’t always align with private-sector’s report.

The labor market has gained heightened attention after Federal Reserve Chairman Jerome Powell indicated at the annual Jackson Hole central banker event last week that the Fed would be watching jobs reports to determine the timing of the start of the reduction of its bond purchases, which supported financial markets during the pandemic.

In addition to the ADP report, IHS Markit’s manufacturing purchasing managers index, or PMI, for August fell to 61.1 from 63.4 in July. That was broadly in line with the earlier released ‘flash’ estimate of 61.2. Material shortages resulted in production constraints, as demand flourished.

The more closely watched comparable report from the Institute for Supply Management showed that manufacturers grew faster in August, despite delta and labor shortages.

On Wednesday, the 10-year German bund rate
TMBMKDE-10Y,
-0.369%

was trading at -0.370%, compared with -0.400% on Tuesday and -0.421% to start the week.

What analysts are saying
  • “We can debate all we want on where US bond yields will go but there has been and will continue to be looking forward a large influence from the direction of European yields,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a daily research note.
  • “Wednesday’s choppy price action following another underwhelming ADP print belied an active volume profile as positions are squared and estimates are refined ahead of NFP,” BMO Capital Markets strategist Ian Lyngen wrote in a note.

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