10 and 30-year Treasury yields held lower after better-than-expected June jobs

Long-dated U.S. Treasury yields were lower Friday after the latest monthly update on the labor market showed that 850,000 new jobs were created in June as the economy perked up and companies rushed to add more workers.

The market for Treasurys will close an hour early on Friday, at 2 p.m., and will remain closed on Monday in observance of Independence Day, or Fourth of the July, which falls on a Sunday this year.

How Treasurys are performing
  • The 10-year Treasury note yield

    was at 1.448%, compared with 1.479% on Thursday at 3 p.m. Eastern Time. Yields for Treasurys fall as prices rise.

  • The 30-year Treasury bond

    rate was at 2.049%, versus 2.086% a day ago.

  • The 2-year Treasury note

    was yielding 0.248%, compared with 0.255% on Thursday.

Fixed-income drivers

Treasury yields were lower but didn’t see much movement after the report on jobs came in better than the 706,000 job that were estimated by economists polled by Dow Jones and MarketWatch. The unemployment rate, meanwhile, rose to 5.9%, compared with 5.8% last month and an expectation for 5.6%.

The report showed that 662,000 private-sector jobs were added, which was 57,000 higher than forecasts, and the overall May jobs figures were raised slightly to 583,0000 from 559,000.

Investors are attuned to the data because it could help to determine the Federal Reserve’s approach to tapering monthly bond purchases, currently running at $120 billion.

Fed members already have been discussing the basis by which they would feel comfortable tapering asset purchases, known as quantitative easing, and raising policy interest rates, which currently stand at a range between 0% and 0.25%.

Focus on the health of the labor market has somewhat put in the back seat growing evidence of inflation popping higher in the aftermath of the COVID pandemic.

Bond markets may keep one eye on oil markets also for further signs of inflation, as higher crude-oil prices

can sometimes reflect, at least in the shorter term. The Organization of the Petroleum Exporting Countries and its allies extended a meeting to Friday after it failed to agree on production levels, with crude prices punching higher on Thursday but edging back early Friday.

Outside of the U.S. jobs data, a report on international trade in goods and services for May came in at $72.1 billion deficit, marking its highest ever level and slightly higher than the $71.2 billion expected, and greater than the $68.9 billion deficit in April. 

A reading on factory orders for May is due at 10 a.m. and are expected to show a rise of 1.5% on the month.

What strategists are saying

“There were some holes though under the hood as the household survey saw a loss of 18k jobs and when combined with the 151k increase in the size of the labor force, the unemployment rate rose to 5.9% from 5.8% and vs the estimate of 5.6%,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.

“After losing 22.3mm jobs in March and April, we’ve since recovered 15.6mm of them back. It is not due to the lack of demand for more that still explains the wide gap but supply as we know. I don’t see anything in this report that should alter the need for the Fed to start cutting back on QE ASAP which does absolutely nothing to help economic growth,” Boockvar wrote.

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