Bond Yields Rise Ahead of U.S. Jobs Update

The yield on U.S. Treasury bonds saw an increase early Wednesday as traders eagerly awaited the latest update on the country’s jobs market.

Key Highlights

• The yield on the 2-year Treasury rose by 5.8 basis points to 4.616%.
• Meanwhile, the yield on the 10-year Treasury increased by 2.9 basis points to 4.204%.
• Lastly, the yield on the 30-year Treasury grew by 2.7 basis points to 4.325%.

Market Drivers

Although benchmark Treasury yields experienced a slight uptick on Wednesday, they still hover near their lowest levels in three months. This decline in yields can be attributed to optimism surrounding a cooling labor market and easing inflation, which could potentially prompt the Federal Reserve to implement interest rate cuts by spring.

The recent release of the jobs opening (JOLTS) report substantiated this narrative and aligned with the desired data outlined by analysts at Nationwide Economics. According to them, “Lower job openings, marginally higher layoffs and steady quits indicate that labor demand and supply are moving into a healthier balance. Fed officials are likely finished raising rates, but they’ll want to see a series of reports with this type of tone to be convinced they can start thinking about loosening policy.”

The upcoming market events include the ADP survey for November private sector hiring, which will be released at 8:15 a.m. Eastern on Wednesday. Following that, Thursday will present the weekly unemployment claims report, followed by the release of the November nonfarm payrolls data on Friday.

Additionally, Wednesday will also see the publication of the revised U.S. third-quarter productivity and the U.S. trade deficit for October at 8:30 a.m.

In light of these events, current market expectations indicate a 99.7% probability that the Fed will retain interest rates within the range of 5.25% to 5.50% after its next meeting on December 13th, as per the CME FedWatch tool.

Furthermore, the likelihood of at least a 25 basis point rate cut in March is currently priced at 61.8%, significantly up from 20.3% recorded a month ago.