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Jan 5, 2019

What was the Bond Yields behavior last Friday, January 4, 2019?


10-year yield spikes after monster beat by jobs report

Thomas Franck


U.S. government debt yields jumped on Friday after the government’s monthly jobs report showed the U.S. economy creating jobs at a much faster pace than Wall Street expected. Wage growth also rose more than expected.
At 9:11 a.m. ET, the yield on the benchmark 10-year Treasury note which moves inversely to price, jumped 6 basis points higher to 2.627 percent, while the yield on the 30-year Treasury bond rose 6 basis points to 2.955 percent. The 2-year yield climbed to 2.453 percent.
The Labor Department said the U.S. economy added 312,000 positions in December and the unemployment rate rose to 3.9 percent. The jobless rate rose as 419,000 new workers entered the workforce and the labor force participation rate increase to 63.1 percent.

Source: FactSet
Wages jumped 3.2 percent from a year ago, gaining 11 cents between November and December, an increase of 0.4 percent. That gain was larger than the 0.3 percent increase Wall Street economists expected.
Short-term yields, which are sensitive to changes in Federal Reserve policy, rose more than yields on long-term debt, suggesting to some that the hotter wage number could make the central bank more secure in its decision to increase in the federal funds rate. Bank of America economist Michelle Meyer said that while it’s unlikely that one month of data will sway Fed policymaking, such a strong print likely affords some officials a “sigh of relief.”
“I don’t think it confirms that [the Fed] will be able to go ahead with the two-hike scenario they’ve forecasted, but the fact that the labor market has held up so strong thus far is obviously a good sign and allows them to feel more comfortable,” she said.
The latest look at the U.S. employment situation comes amid growing fears of an impending slowdown in economic growth and that the Fed could overshoot its goal of curbing inflation. The U.S. central bank raised the benchmark overnight lending rate four times in 2018 in an effort to prevent the economy from overheating, but President Donald Trump has criticized the Fed for endangering the economic recovery.
A portion of the so-called yield curve remains inverted, a phenomenon characterized by short-term rates that exceed long-term rates. As of Friday morning, the yield on the benchmark 2-year Treasury note hovered at 2.449 percent, above the yield on the 5-year note at 2.447 percent. The closely followed spread between the 2-year Treasury note yield and the 10-year Treasury note yield remained positive at 17 basis points.

U.S. Markets Overview: Treasurys chart

TICKERCOMPANYYIELDCHANGE%CHANGE
US 3-MOU.S. 3 Month Treasury2.4140.0020.00
US 1-YRU.S. 1 Year Treasury2.5730.0660.00
US 2-YRU.S. 2 Year Treasury2.4980.1090.00
US 5-YRU.S. 5 Year Treasury2.5010.1330.00
US 10-YRU.S. 10 Year Treasury2.6680.1150.00
US 30-YRU.S. 30 Year Treasury2.9810.0810.00
On Thursday, China’s commerce ministry said the U.S. and Chinese would hold vice-ministerial level negotiations over trade in Beijing on Jan. 7-8. The two countries are trying to reach a breakthrough to resolve their differences over a 90-day tariffs truce.
Investors will also be keeping an eye on a speech by Federal Reserve chair Jerome Powell at 10:15 am ET. Powell will take part in “Federal Reserve Chairs: Joint Interview” panel on monetary policy and central banking at the American Economic Association and Allied Social Science Association annual meeting in Atlanta, Georgia.
— CNBC’s Jeff Cox and Silvia Amaro contributed reporting.

Source: CNBC