10-year and 30-year U.S. bond yields rose to the highest this year, shorts look for bright spots in non-farm data
2023-07-08 04:20:08 Source: Financial circles Share to:
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The June non-farm payrolls data did little to ease the decline in U.S. Treasury bonds. Although the number of new jobs fell, strong wage growth pushed 10-year and 30-year Treasury yields to their highest levels this year.
The 2-year and 5-year yields rose to their highest levels since 2007 next Thursday on expectations of a rate hike, and bond prices got a boost after the non-farm payrolls data, as job creation fell below the U.S. rate for the first time in more than a year. Economists predict.
As investors began to notice higher-than-expected wage growth, long-dated Treasury yields resumed their rally, with the 10-year yield hitting 4.09% and the 30-year yield hitting 4.06%. By midday in New York, the market had stabilized, with yields weighing on the session’s highs.
“Wage growth is still higher than the Fed would like,” said Randall Kroszner, a professor at the University of Chicago and a former Fed governor. “They should be saying they need to raise rates further.”
Data from the Labor Department on Friday showed that nonfarm payrolls increased by 209,000, after the figures for the previous two months were revised downward. Average hourly earnings, however, rose more than expected, rising 4.4% year-over-year.
The report suggests that while the Fed’s July rate hike may be a foregone conclusion, the economy is proving to be struggling with monetary tightening.
Tony Farren, managing director of rates sales and trading at Mischler Financial Group, said the Fed is expected to raise rates in July, but “that would be a mistake” because inflation is slowing and the economy and employment are not as strong as the Fed thinks they are. “
Downward pressure on yields on Friday could also come from bargain hunting by investors.
The divergence between short-term and long-term bonds has moderated the degree of inversion of the yield curve. The spread between 2-year and 10-year yields narrowed to 87 basis points, having reached almost 111 basis points on July 3.
Traders widely expected a rate hike in July, but they slightly lowered their forecasts for a second hike this year.
2023-07-07 20:20:08
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