BOND REPORT: Treasury Yields Book Weekly Rise Ahead Of Fed Meeting

By Sunny Oh Features Dow Jones Newswires

Treasurys struggled for direction on Friday after the employment report showed the economy was notching healthy job gains but without a big pickup in wages.

Continue Reading Below

Treasury yields rose across the board this week ahead of the Federal Open Market Committee's rate-setting meeting Dec. 12-13, where an increase in the fed-funds rate is seen as a virtual certainty.

What did Treasurys do?

The yield for the 10-year benchmark Treasury note ticked higher a basis point to 2.383%, contributing to a weeklong rise of 2 basis points.

The 2-year note yield edged one basis point lower to 1.798%, but rose 2 basis points this week.

The 30-year bond yield was unchanged at 2.773%, and rose 1.1 basis point over the past five days.

Continue Reading Below

Bond prices move in the opposite direction of yields.

What's driving Treasurys?

The U.S. economy added 228,000 jobs in November, above the 200,000 forecast from economists surveyed by MarketWatch. The unemployment rate remained at 4.1%. But average hourly earnings rose 0.2%, contributing a year-over-year gain of 2.5%, short of the 0.3% from economists' expectations. And October's gain of 0.1% was revised down to an 0.1% fall. The disappointing wages data was blamed for driving the dip in Treasury yields.

Investors have put inflation data front and center at the expense of labor market data as the traditional relationship between low unemployment and wage pressures have become increasingly contentious. The Fed has asserted that inflation would need to return to a 2% target before it could proceed with further monetary tightening.

See: Wages called disappointment in otherwise strong November jobs report (http://www.marketwatch.com/story/wages-called-disappointment-in-otherwise-strong-november-jobs-report-2017-12-08)

Read: U.S. adds 228,000 jobs in November; unemployment flat at 4.1% (http://www.marketwatch.com/story/us-gains-228000-new-jobs-in-november-in-another-strong-show-of-hiring-2017-12-08)

What did market participants say?

"Broad labor indicators in fine shape, but nothing to startle bond traders. The misses on expectations for average hourly earnings were a function of bad estimates more than bad outcomes. The year-over-year change of 2.5% is more than not shabby given the size of the increases in the fourth quarter of last year. It's a steady climb, not the sprint that some have feared with unemployment below 4.5% since the first quarter," said Jim Vogel, an interest-rate strategist at FTN Financial.

What else is on investors' radar?

The University of Michigan reported consumer confidence for December fell to 96.8 (http://www.marketwatch.com/story/sour-on-tax-reform-us-consumer-sentiment-edges-down-to-three-month-low-2017-12-08), from 98.5 in the previous month.

Congress passed a two-week spending bill that will keep the lights on in federal agencies until Dec. 22. The extra breathing room will give Republicans the focus they need to pass their tax cuts and avoid the distraction of a potential government shutdown.

What did other assets do?

European bonds followed the action in the Treasurys market. The German 10-year government bond yield rose a basis point to 0.305%, while the French 10-year government bond yield rose 1.3 basis point to 0.622%.

(END) Dow Jones Newswires

December 08, 2017 15:48 ET (20:48 GMT)