US Treasury yields edge lower, curve steepens ahead of Friday's jobs data
Treasury yields fell and the yield curve steepened on Thursday ahead of a much-anticipated jobs report on Friday which will be watched for new clues on whether the economy is strong enough for the Federal Reserve to keep hiking interest rates.
Longer-dated yields have surged to 16-year highs as investors adjust for the likelihood that the U.S. central bank will hold rates higher for longer, and potentially raise them again as the labor market remains solid and inflation stays above the Fed’s 2% annual target.
“The market is conceding that the Fed not only will be more likely to hike again before the end of the year, but also the likelihood of them cutting any time for the foreseeable future is very low,” said Ian Lyngen, head of U.S.
rates strategy at BMO Capital Markets in New York.
Longer-dated yields rose after data on Thursday showed that the number of Americans filing new claims for unemployment benefits rose moderately last week, while layoffs declined in September, pointing to still-tight labor market conditions.
Friday’s jobs report is expected to show that employers added 170,000 jobs in September.
Benchmark 10-year notes were last down three basis points on the day at 4.706%. They have fallen from 4.884% on Wednesday, the highest since 2007.
Two-year notes fell five basis points to 5.020%.
They are holding below the 5.202% level hit on Sept. 21, which was the highest since July 2006.
The closely watched yield curve between two-year and 10-year notes steepened as far as minus 29 basis points, the smallest inversion since March.
The yield curve typically steepens and turns positive before a recession takes hold, which is causing some nervousness that this move could be a negative precursor if it
