BOND REPORT: Treasury Yields Edge Higher As Investors Focus On Jobs Data
Treasury prices edged lower Thursday, pushing up yields as investors digested data on jobless claims and private-sector payrolls a day ahead of the December U.S. jobs report.
What are yields doing?
The yield on the 10-year Treasury note pared an earlier rise to end at 2.452%, up around 0.7 basis point, while the 2-year note yield rose 2 basis points to 1.955%. The yield on the 30-year Treasury bond rose marginally to 2.783%.
Yields and debt prices move in opposite directions.
What's driving the market?
Treasury yields declined Wednesday after minutes from the Federal Reserve's December meeting highlighted divisions over the pace of future monetary tightening.
Attention on Thursday shifted to the labor market as investors digested private-sector employment data from payroll-services firm ADP and awaited data on weekly jobless claims, with yields extending their rise after a robust reading from ADP. The main event, however, is likely to be the December jobs report in less than 24 hours.
What are analysts saying?
Some economists warned against reading too much into a strong ADP reading. Ward McCarthy, chief financial economist at Jefferies, argued in a note that while the correlation between ADP data and official data on private payrolls have periodically improved, "the relationship is simply not reliable."
"There have been a number of big misses in 2017, the most significant being in March when ADP payrolls rose 255K and BLS private payrolls rose just 59K," he said, in a note. In 2017, the average absolute error was roughly 49,000, he said.
When it comes to the December jobs report, "the real focus will be on wages where the expectation is for a 0.3% increase in average hourly earnings. Recent strength in data combined with the passage of the tax reform package should support our call for higher yields and a modest steepening of the curve over the medium term," wrote analysts at Société Générale, in a note.
Read:Lack of wage growth will likely dampen celebration of December jobs report (http://www.marketwatch.com/story/lack-of-wage-growth-will-likely-dampen-celebration-of-strong-december-jobs-report-2018-01-04)
What does economic data say?
ADP said private-sector payrolls rose 250,000 in December (). First time jobless claims in the week ended Dec. 30 came in at 250,000 (http://www.marketwatch.com/story/jobless-claims-up-3000-to-250000-in-last-week-of-2017-2018-01-04) versus a revised 248,000 a week earlier. Economists surveyed by MarketWatch had forecast 240,000 initial claims.
Friday's jobs data is expected to show a rise of 198,000 in December nonfarm payrolls after a 228,000 rise in November. The unemployment rate is forecast to remain steady at 4.1%, while average hourly earnings are forecast to rise 0.3% after a 0.2% rise in November.
Read:Hiring like it's 1999: U.S. jobs market hasn't been this good in decades (http://www.marketwatch.com/story/hiring-like-its-1999-us-jobs-market-hasnt-been-this-good-in-decades-2017-12-30)
(END) Dow Jones Newswires
January 04, 2018 16:08 ET (21:08 GMT)