BOND REPORT: Treasury Yields Hold Slight Gains Ahead Of Jobless Claims, Inflation Reports

By Mark DeCambre, MarketWatchFeaturesDow Jones Newswires

U.S. Treasury yields were up slightly early Thursday, adding to meager gains in the previous session, as traders braced for key economic reports, notably on inflation, that could help lay the groundwork for the day's action.

A July report on personal income, consumer spending and core inflation is due to hit at 8:30 a.m. Eastern Time. Economists polled by MarketWatch produced median estimates for a 0.4% rise in spending and income and a 0.1% monthly rise for inflation.

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Market participants say signs of sluggish inflation, remaining below the Federal Reserve's target of 2% on an annual basis, has been the main factors limiting a rise in bond yields, which move inversely to prices, despite efforts by the U.S. central bank to normalize monetary policy in the aftermath of the 2007-09 financial crisis, by lifting interest rates and plotting an unwind of its $4.5 trillion crisis-era asset portfolio. Shrinking its balance sheet also is likely to tilt historically low borrowing costs higher.

Because rising inflation can erode the fixed value of a bond, signs of muted inflation can be supportive to buying in Treasurys, holding yields lower.

Ahead of the reports, the benchmark 10-year Treasury yieldinched 0.4 basis point higher to 2.149%, still near its lowest reading since Nov. 10. The 2-year note yield , which is more sensitive to shifts in the interest-rate outlook, ticked up 0.5 basis point to 1.338%, while the 30-year bond yield also inched up by about the same amount to 2.753%.

Government paper stabilized on Wednesday after a so-called flight to assets perceived as safe abated as the focus on escalating military actions between North Korea and the U.S. and its allies near the Korean Peninsula has shifted somewhat. The S&P 500 index finished higher for a forth straight session, marking its longest win streak in about three months, while the Dow Jones Industrial Average and the Nasdaq Composite Index also ended in positive territory (, underlining appetite to risky assets like stocks.

Upbeat data, suggesting that the Fed may have sufficient grounds to hike rates at least once more in 2017, also may have buoyed bond yields and equities.

ADP on Wednesday reported that private-sector payroll has risen 237,000 in August, a sharp rise from 201,000 in July. The report comes ahead of the closely watched Friday jobs report released by the Labor Department.

The ADP private-sector jobs number has undershot nonfarm-payrolls report by 24,000 in the three of the last four months, according to Ian Lyngen, head of U.S. rates strategy for BMO Capital Markets. But it is still used to get an early direction read of labor-market heath. An updated reading of second-quarter gross domestic product on Wednesday, raised to 3%, also helped add to optimism.

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A combination of end of month bond -portfolio rebalancing and seasonally thin volumes has limited a further rise in bond yields so far, market participants said.

Looking ahead, an August reading on business conditions in the Chicago area and July pending home sales are set to arrive at 10 a.m. Eastern.

(END) Dow Jones Newswires

August 31, 2017 08:01 ET (12:01 GMT)