U.S. Treasury yields edged lower early Friday as investors awaited the May jobs report for a read on the state of what’s been a stubbornly hot labor market after fears of a first-ever federal default were extinguished by Congress late Thursday.
What yields are doing
-
The yield on the 2-year Treasury note
TMUBMUSD02Y,
4.415%
was little changed at 4.333%, versus 4.339% at 3 p.m. Eastern on Thursday. -
The 10-year Treasury note yield
TMUBMUSD10Y,
3.631%
ticked down to 3.601%, compared with 3.607% Thursday afternoon. -
The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.838%
declined to 3.819% from 3.833% late Thursday.
Market drivers
Fears of a U.S. technical default were put to bed late Thursday after the Senate voted to raise the debt-ceiling, sending the legislation to President Joe Biden for his signature. Treasury Secretary Janet Yellen had warned that the government could run out of the ability to pay its bills as early as June 5 without action.
The focus Friday is solidly on the May jobs report though.
The U.S. is expected to add 190,000 jobs in May, down from 253,000 in the prior month, economists polled by The Wall Street Journal estimate. That would be the second-smallest increase this year.
Investors are looking for signs a strong labor market is starting to falter as they assess the outlook for Federal Reserve interest-rate moves. Fed officials this week have indicated that they may hold off on raising rates at their June meeting while reserving the ability to lift at subsequent meetings if warranted.
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Fed-funds futures traders have priced in a 77% probability the Fed will leave the key rate unchanged at 5% to 5.25% when it concludes its June 13-14 policy meeting, according to the CME FedWatch tool, with a 23% chance of a quarter-point hike. A week ago, the market had priced in a roughly 64% probability of a quarter-point rate hike.
What analysts say
The labor report “represents another data point that could prove the difference between the Federal Reserve leaving rates unchanged at its next meeting on June 14, or lifting them by another 25 basis points,” said Steve Barrow, head of G-10 strategy at Standard Bank, in a note.
“Our view is that rates will be kept stable, but clearly, we have to hope that data such as payrolls are not so alarming that it spooks the Fed into action,” he wrote.
This post was originally published on Market Watch
