Treasury yields were little changed Thursday morning as traders await Friday’s March jobs data, which will show whether the U.S. labor market is cracking under the weight of sharp interest-rate increases.
What’s happening
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
3.771%
was little changed at 3.767% versus 3.761% on Wednesday. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.282%
was 3.291%, up slightly from 3.285% late Wednesday. On Wednesday, the 10-year yield dropped for the six straight trading session, the longest stretch since the period that ended March 9, 2020. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.531%
slipped to 3.542% from 3.556% as of Wednesday afternoon.
What’s driving markets
Data released on Thursday showed initial weekly jobless claims topping 200,000 for the ninth week in a row. New jobless claims fell to 228,000 for the seven days that ended on April 1, down from a revised 246,000 in the prior week. The revised figures showed that the labor market softened more than initially thought.
The data follows other releases 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. The next major release is the nonfarm payrolls report for March, which will be published on Good Friday when there will be an abbreviated Treasury trading session.
Markets are pricing in a 56.5% probability that the Fed will leave interest rates unchanged at between 4.75% and 5% on May 3, according to the CME FedWatch tool. Fed funds futures traders see an almost certain chance that the central bank will cut rates by December.
What analysts are 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,” said Richard Hunter, head of markets at U.K.-based Interactive Investor.
“The most eagerly awaited economic release of any given month is the nonfarm 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 wrote in a note.
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