Bond rally stalls ahead of US jobs data
The sizzling global bond rally stalled on Thursday ahead of a key U.S. jobs report, with a slump in Japanese debt adding to the nerves of Treasury traders already fretting that yields had dropped too far.
The yield on 10-year U.S. notes jumped as much as eight basis points to 4.18%, paring declines this week to two basis points. Similar-dated Japanese yields soared by the most this year, after a weak auction of long-term debt and comments from central bank Governor Kazuo Ueda on more challenging policy ahead. European bonds also fell.
The correction comes after a strong run for global bonds fueled by ramped up bets on interest-rate cuts by major central banks. Investors are now turning their attention to Friday’s U.S. payrolls to fine-tune bets ahead of next week’s Federal Reserve, European Central Bank and Bank of England meetings. The Bank of Japan meets the following week.
“The rally in the global bond market has gone very fast and far in November, so it is reasonable to pause,” said Janet Mui, head of market analysis at RBC Brewin Dolphin.
Bond investors came into the week facing key tests from U.S. data on the labor market. The first couple of reports favored bets on a Fed pivot toward rate cuts, but Friday’s jobs data may easily overwrite that impression.
Economists estimate U.S. unemployment was steady at 3.9% last month, with the economy adding 185,000 jobs, up from October’s 150,000 reading that was the weakest growth since June.
TD Securities recommended selling 10-year Treasuries ahead of Friday’s report, which puts yields “at risk of backing up sharply.” JPMorgan Chase & Co. strategists highlighted in a note there’s a risk yields may move higher, and added the Treasuries market is showing signs of the
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