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Bond Report: Treasury yields decline as investors await U.S. jobs data

Treasury yields moved lower Thursday as investors awaited weekly U.S. jobs data and assessed remarks by Federal Reserve officials on the probable size of future interest rate hikes.

What yields are doing

The yield on the 2-year Treasury note

fell to 3.078%, down from 3.108% at 3 p.m. Eastern on Wednesday.

The 10-year Treasury note yield

was 2.718%, compared with 2.747% Tuesday afternoon.

The yield on the 30-year Treasury bond

was 2.974% versus 2.976% late Tuesday.

What’s driving the market

Yields were pulling back after a rise in the previous session following a round of stronger-than-expected data on activity in the U.S. services sector and factory orders, as well as more warnings from Federal Reserve officials against expectations that fears of an economic slowdown would crimp prospects for interest rate increases to get inflation back under control.

The Bank of England on Thursday was the latest central bank to deliver an outsize rate increase, lifting its Bank Rate by half a percentage point to 1.75% — the largest hike since 1995 — as it warned that inflationary pressures continued to build and said a recession was likely to begin later this year.

Data on U.S. jobless claims is due for 8:30 a.m. Economists surveyed by The Wall Street Journal expect first-time applications for benefits to rise to 260,000 in the week ended July 30 from 256,000.

The U.S. July jobs report is due Friday. Employment gains in July are expected to drop to 258,000 from 372,000 in the prior month, a poll of economists by The Wall Street Journal estimates. If so, it would mark the smallest increase since December 2021.

See: Hiring slowdown? U.S. seen adding just 258,000 jobs in July

What analysts say

“Yields have come down sharply on weakening global economic activity and geopolitical concerns. In fact, the 10-year TSY fell below the 2.6% yield factor. As for the inverted yield curve, we believe this confirms a technical recession is now in course as well as future weaker economic performance,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in a note.

“On the other hand, we don’t expect the 10-year TSY yield to slip below 2.50% any time soon as technical factors may kick in,” he wrote.

Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21/22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.

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