BOND REPORT: Treasury Yields Struggle For Direction After Jobs Report

By Mark DeCambre, MarketWatch , Sunny Oh Features Dow Jones Newswires

The U.S. economy added 261,000 new jobs in October, below the 325,000 jobs expected by economists polled by MarketWatch.

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U.S. Treasury yields inched lower, but stayed in a tight range, on Friday after the employment report revealed sluggish wage growth but a rebound in new jobs, extending investors' protracted wait for a return to levels of inflation considered healthy.

The nonfarm-payrolls report comes a day after President Donald Trump nominated Fed Gov. Jerome Powell (http://www.marketwatch.com/story/imagining-life-under-a-jerome-powell-fed-2017-10-20) to replace Chairwoman Janet Yellen as the head of the Federal Reserve and after the central bank concluded its most recent policy gathering on Wednesday without a substantive change, as expected.

What are Treasury yields doing?

The yield on the 10-year Treasury note was at 2.340%, compared with 2.347% late Thursday. The 2-year note yield was yielding 1.608%, little changed from the previous session, while the 30-year bond yield ticked down to 2.823%, from 2.829%.

Bond prices move in the opposite direction of yields.

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What is driving markets?

The U.S. economy added 261,000 new jobs in October, below consensus estimates of economists polled by MarketWatch for a gain of 325,000 jobs. The rebound comes after a loss of 33,000 jobs in September, which itself was increased to a slight gain, as the impact of Hurricane Irma and Hurricane Harvey continued to muddle the jobs picture. The storms devastated Houston, parts of Louisiana and slammed Florida's coastline. Wages fell 1 cent to an average of $26.53 an hour.

See: U.S. adds 261,000 jobs in October in hurricane-inflated gain (http://www.marketwatch.com/story/us-adds-261000-jobs-in-october-in-hurricane-inflated-gain-2017-11-03)

Read: Economists say jobs picture returning to normal after hurricane disruption (http://www.marketwatch.com/story/economists-say-jobs-picture-returning-to-normal-after-hurricane-disruption-2017-11-03)

Signs of a strong jobs market and wage growth would likely have cemented the Fed's plan to raise interest rates in December. Wall Street is pricing in a more than 97% chance of a rate increase next month, according to CME Group data (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).

On Thursday, the House Ways and Means Committee released details on the long-awaited Republican tax reform (http://www.marketwatch.com/story/heres-a-breakdown-of-how-the-new-house-tax-bill-impacts-business-taxes-2017-11-02), while President Donald Trump nominated Powell (http://www.marketwatch.com/story/text-of-powells-statement-on-being-named-fed-chairman-nominee-2017-11-02) as the next head of the U.S. central bank. Powell is considered a candidate whose measured approach to normalizing crisis-era monetary policy most closely aligns with Yellen, whose term as the leader of the Fed ends in February.

What are strategists saying?

"On his fundamental economic views, Powell has been in line with the consensus FOMC thinking, with his speeches indicating that he's fully on board with themes of lower potential growth and lower neutral interest rates. As such, his leadership is not likely to represent a structural shift in terms of the key views shaping the medium-term monetary policy outlook," wrote Morgan Stanley economists led by Ellen Zentner and Robert Rosener in a Thursday research report.

While, Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott, said the tepid wage growth would be of more concern to investors.

(https://twitter.com/lebas_janney/status/926427738495430657)

What else is in focus?

What other assets are in focus?

The U.K. 10-year government bond yield was at 1.259%, versus 1.261% after the Bank of England on Thursday raised interest rates for the first time (http://www.marketwatch.com/story/boe-delivers-a-typical-dovish-hike-analysts-react-to-historic-uk-rate-rise-2017-11-02)in a decade, but signaled that policy makers still harbored some concerns about the U.K. economy and inflation as Britain renegotiates trade agreements after voting last year to exit from the European Union.

The yield on the 10-year German bond , known as the bund, was at 0.354%.

(END) Dow Jones Newswires

November 03, 2017 10:08 ET (14:08 GMT)