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Bond Report: U.S. Treasury yields climb ahead of jobless claims, durable goods

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U.S. Treasury yields were higher early Thursday, after the 10-year Treasury saw its yield rise for the first time in five sessions on Wednesday and as the long bond extended its yield slide to a fifth consecutive day.

Fixed-income investors are awaiting a string of data, including a weekly update on jobless benefit benefits claims, a reading on April durable goods orders, an update on first quarter gross domestic product, and a reading of April pending home sales.

The data come ahead of a key measure for bond investors, the April personal consumption expenditure, due on Friday, and the May jobs report due the following Friday in a holiday-shortened Memorial Day week.

How Treasurys are performing
  • The 10-year Treasury note
    TMUBMUSD10Y,
    1.618%

    was yielding 1.592%, up 2 basis points from Wednesday’s level at 3 p.m. Eastern Time.
  • The 30-year Treasury
    TMUBMUSD30Y,
    2.300%
    ,
    known as the long bond, was yielding 2.276%, up 1.8 basis points.
  • The 2-year Treasury note
    TMUBMUSD10Y,
    1.618%

    rate was at 0.148%, versus 0.147% a day ago.

On Wednesday, the 10-year Treasury note snapped a four-day yield slide, while the 30-day extended its rate retreat to a fifth straight session, hanging around the lows level since May 6.

Fixed-income market drivers

After a steady buying stretch that had pushed yields down to around three-week lows, bonds yields are slowly edging back up, but trading within a relatively tight range.

Informing recent trade is the insistence of members of the Federal Reserve that they will focus on achieving maximum employment before withdrawing support from the market, including a $120 billion-a-month asset-purchase program.

Still, market participants are starting to wager that the Fed may begin to signal more clearly that it is ready to scale back its market-supportive bond buying in August or September.

On Wednesday, Randal Quarles, the Fed’s vice chairman for supervision, said it would soon be time for Fed officials to begin debating slowing the central bank’s bond purchases, if the economy continues to improve at its current pace. Federal Reserve Vice Chair Richard Clarida also said on Tuesday that U.S. central bank officials may be able to begin discussing the appropriate timing of scaling back their bond-buying program at upcoming policy meetings,

This week, however, the focus for investors may be less about this week’s economic reports and more about the May jobs report next week, following a disappointing April jobs report that sent the 10-year to a yield around 1.48%.

In the near-term, investors will watch for signs of what the May jobs report might indicate in Thursday’s weekly jobless claims figures. Economists surveyed by Dow Jones are expecting that 425,000 Americans filed for unemployment benefits in the week ended May 22. In the week prior, jobless claims reached a fresh pandemic-era low of 444,000.

Separately, investors are awaiting a $62 billion auction of 7-year U.S. Treasury notes
TMUBMUSD10Y,
1.618%

that will be looked at closely as a gauge of appetite and its impact on the broader fixed-income market. The 7-year note was yielding 1.258% Thursday morning, compared with 1.230%.

What are strategists saying?

“I have been expecting the 10 year to move up further towards 2%, but I’m beginning to doubt myself. If not, that suggests that this next economic cycle ends up weaker than the last—right now we are sitting at the lows of the last cycle (in terms of 10 year yields),” Crit Thomas, global market strategist at mutual-fund company Touchstone Investments, told MarketWatch in emailed remarks.

“This is hard to swallow, but would be consistent with the trend that we have been seeing over the last few cycles (and with what we’ve been seeing in Japan and Europe). It would also suggest that all of this massive monetary and fiscal stimulus did nothing for the longer term prospects of our economy,” the analyst said.

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