BOND REPORT: Treasury Yields Dip As Traders Await Jobless Claims, Services Data

By Mark DeCambre, MarketWatch Features Dow Jones Newswires

U.S. Treasury yields retreated modestly on Thursday as investors awaited economic reports on employment and the services sectors that could help guide the Federal Reserve's hand as it gears up to normalize monetary policy.

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The yield on the benchmark 10-year U.S. Treasury note dipped 2 basis points to 2.244%, while the 2-year note yield gave up 0.2 basis point at 1.359%. The yield on the 30-year U.S. Treasury bond , known as the long bond, skidded 2.8 basis points lower at 2.819%.

Yields rise as debt prices fall.

A report on weekly jobless claims is slated to hit at 8:30 a.m. Eastern Time, with economists polled by MarketWatch forecasting 244,000 claims.

The July figure for Markit's purchasing managers index for services is due at 9:45 a.m. Eastern. Then 15 minutes later, ISM's nonmanufacturing index for the same month is expected, along with June data on factory orders. Economists anticipate a reading of 56.9% for the ISM gauge and 2.9% growth in factory orders.

Government-bond prices have been trading within a relatively tight range over the past several week but mostly drifting lower, as sluggish inflation figures and a series of lackluster reports have supported a go-slow approach for the Federal Reserve as it aims to lift rates and shrink a $4.5 trillion asset portfolio, accumulated during the heart of the financial crisis begun in 2008.

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A report on Thursday from the Organization for Economic Cooperation and Development indicated that consumer prices among the world's 20 largest economies was at an eight-year low, even as optimism about the health of many countries is looking up. It is a point that has bedeviled academics, strategists and investors alike since an improving economic climate, highlighted by solid jobs growth in the U.S., should theoretically lead to a pick up in inflation.

Inflation erodes the value of the fixed value of Treasurys, with an absence of rising prices helping to support bond buying, weighing on yields.

Mark Newton, technical analyst and founder of Newton Advisors, in a Thursday research note said the 10-year Treasury holding above a yield of 2.22% in the near term will be important, with a push below that level suggesting that momentum lower could accelerate. However, he said investors shouldn't get too worked up about recent bond buying.

"Holding 2.22[%] will be important for Treasury bears and for now, can't make too much of this pullback in yields," Newton wrote.

Also on the radar for traders was a Bank of England statement on interest-rate policy (http://www.marketwatch.com/story/boe-says-rates-may-rise-faster-than-markets-expect-2017-08-03), followed by a news conference featuring BOE Gov. Mark Carney. The BOE made no changes to its monetary policy but indicated that from here, rates may rise faster than markets expect.

Against that backdrop. U.K. 10-year Treasury yield were down 6.3 basis points at 1.18%, while those for comparable, benchmark German bonds, known as bunds , slipped 1.9 basis points at 0.47%.

Looking further ahead, Friday's closely watched monthly jobs report will be closely watched. Economists surveyed by MarketWatch produced a consensus forecast for a 180,000 rise in July nonfarm payrolls, while the unemployment rate is predicted to tick down to 4.3% from 4.4%. Average hourly earnings are seen rising 0.3% after a 0.2% rise in June

(END) Dow Jones Newswires

August 03, 2017 08:28 ET (12:28 GMT)