BOND REPORT: Treasury Yields Steady Ahead Of Key Jobs Number

By Sunny Oh Features Dow Jones Newswires

Treasury yields steadied on Friday as traders await a key nonfarm-payrolls report that could help to confirm strength in the U.S. labor market and influence the Federal Reserve's monetary-policy plan.

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The yield for the 10-year note was unchanged at 2.210%. Bond prices move in the opposite direction of yields; one basis point is one hundredth of a percentage point.

The yield for the 2-year note , the most sensitive to interest-rate expectations, lost 0.8 basis point to 1.290%, while the yield for the 30-year bond edged off 0.3 basis point to 2.860%.

The Bureau of Labor Statistics will release its closely watched employment figures at 8:30 a.m. Eastern Time, with economists polled by MarketWatch expecting 185,000 jobs created in May, with the unemployment rate holding at 4.4%.

Friday's jobs reading follows a better-than-expected showing from Automatic Data Processing Inc.'s(ADP) private-sector payrolls report, which showed a jump to 253,000 jumps in May, compared with (http://www.marketwatch.com/story/private-sector-job-growth-rebounds-to-rip-roaring-pace-in-may-adp-says-2017-06-01)174,000 in April (http://www.marketwatch.com/story/private-sector-job-growth-rebounds-to-rip-roaring-pace-in-may-adp-says-2017-06-01), analysts jobs report to rebound in a similar fashion. However, the pair of labor reports don't always align, said economists.

See: Another shower of new U.S. jobs expected for May (http://www.marketwatch.com/story/another-shower-of-new-us-jobs-expected-for-may-2017-06-01).

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A gauge of economic health, a solid jobs number could stoke growth and inflation expectations, which have can have a corrosive effect on the fixed-interest payments of U.S. government paper.

Yields might rise and finally price in the impact of an imminent rate hike if the jobs report posts a solid headline number, said Charles Comiskey, head of trading at Scotiabank. The Chicago Mercantile Exchange's FedWatch tool showed traders expected an 88.8% chance of a rate hike (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).

Rates should rise in anticipation of a higher rate hike as existing bonds are discounted to offer the same returns as higher-yielding new issuance. But a tepid bond-market reaction to the bullish ADP payrolls report, but a rally in equities (http://www.marketwatch.com/story/us-stocks-on-track-to-edge-higher-rebounding-from-two-day-dip-2017-06-01) on Thursday's session makes it difficult to predict how yields will respond, said Comiskey.

Along with the Friday jobs numbers, the Bureau will release a host of other labor-related statistics. The unemployment rate, average hourly earnings and labor-participation rate will come out at the same time.

On the political front, President Donald Trump pulled the U.S. out of the Paris climate accord, a nonbinding agreement for signatory members to pledge to cutback on greenhouse emissions to curb global warming. But Trump's spotty record pushing legislation through Congress meant the impact on Treasury yields was subdued.

Traders will also look ahead to two Fed speakers later around noon. Philadelphia Fed President Patrick Harker, a voting member of the interest-rate setting committee, will speak on the economic outlook at 12:45 p.m. Shortly after, Dallas Fed President Robert Kaplan, also a voting member, will appear in a moderated question and answer session in Dallas, Texas at 1 p.m. Eastern.

Both have said they expect two further rate increases this year, and hope the central bank will begin to reduce its $4.5 trillion balance sheet by the end of 2017.

(END) Dow Jones Newswires

June 02, 2017 08:30 ET (12:30 GMT)