U.S. bond yields edge lower after May jobs data


U.S. government bonds yields edged lower Friday morning, after a May jobs report that saw a smaller-than-expected rise in nonfarm payrolls.

How Treasurys are performing
  • The 10-year Treasury note
    TMUBMUSD10Y,
    1.601%

    was at 1.611%, down 1 basis point. Yields and bond prices move in opposite directions.

  • The yield on the 30-year Treasury
    TMUBMUSD30Y,
    2.285%
    ,
    known as the long bond, was at 2.295%, up 0.5 basis point.

  • The 2-year Treasury note
    TMUBMUSD02Y,
    0.144%

    was at 0.153%, versus 0.158% a day ago.

On Thursday, the 2-year Treasury yield rose by the most in one day since April 26, hitting its highest level since 2013. The 10-year benchmark note, meanwhile, saw its largest daily rate move since May 27, which pushed yields to their highest since May 21.

Fixed-income drivers

The U.S. economy added 559,000 new jobs in May even though most companies were eager to hire, a further sign that widespread labor shortages are holding back an economic recovery. Economists surveyed by Dow Jones and The Wall Street Journal had produced a consensus forecast for a gain of 671,000.

The unemployment rate, meanwhile, slipped to a pandemic low of 5.8% from 6.1%.

The Wall Street consensus estimate is for a gain of 671,000 in May, based on a poll of economists by Dow Jones and The Wall Street Journal. The unemployment rate, meanwhile, is expected to dip to 5.9% from 6.1%. The official rate probably understates the true level of joblessness by 2 to 3 percentage points, economists say, but it is falling steadily.

Markets have also been fixated on inflation and the Fed’s response to potentially out-of-control price rises. A number of Fed members have already stated that it may be time to start considering removing elements of the Fed’s easy-money policies put in place during the height of the pandemic.

Read nextWhy the bond market might not suffer another taper tantrum when the Fed signals it is ready to move

On Thursday, New York Fed President John Williams, however, said that it is too soon for the central bank to start slowing down its asset purchases.

In addition to jobs data, investors also are watching for a report on factory orders due at 10 a.m.

What analysts and traders say

Treasurys were remarkably unchanged in the run-up to the data, said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. “Since the release, we’ve seen a modest rally, but nothing to suggest a range break is in the offing. From here, there is little on the macro horizon to alter the prevailing trend ahead of the summer weekend.”

“Certainly, this is not the ‘million jobs per month’ that looked like the base case expectation for the late spring ahead of the April payrolls data, but it isn’t a disaster either,” said Thomas Simons, money-market economist at Jefferies, in a note.

“The data is consistent with other indicators of a labor shortage that was already previously well understood and that should abate somewhat as the enhanced unemployment benefits programs continue to expire throughout the summer,” he said.



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